• Premier’s Liberals seeking to hold off challenge from Wilders
  • Housing, health care, security benefit in annual budget

The Dutch government will spend an extra 1.1 billion euros ($1.2 billion) next year to lift voters’ purchasing power, as an expanding economy allows it to step back from austerity measures in its final budget before elections next year.

Prime Minister Mark Rutte’s coalition will provide subsidies for low-income housing and health care and expand tax relief, the government said in its 2017 budget presentation in The Hague on Tuesday. Another 450 million euros will be added to security spending and 300 million euros to defense, areas of increasing concern to voters amid an upsurge of violence in neighboring countries.

“The tide has turned,” Finance Minister Jeroen Dijsselbloem told lawmakers. “We are on solid ground again. We can look ahead again and invest in chances for people.”

Rutte is entering the final stretch of his tenure with the economic wind in his favor after years of austerity measures. Unemployment has fallen to the lowest rate since the last election in 2012, house prices are soaring and consumer confidence is near the highest level since the financial crisis. That may help Rutte’s Liberal Party fend off the challenge from populist politician Geert Wilders, who’s Freedom Party has gained support in recent years by arguing the Dutch are badly off because of their membership in the European Union.

Elections in the Netherlands are being closely watched in a Europe preparing for Britain to leave the bloc and in which a wave of populist politicians have gained traction from the refugee crisis and years of a stumbling economy. The Netherlands is the first of a group of countries representing about 40 percent of the EU’s gross domestic product to hold national polls next year, and the Freedom Party may be best placed of any of the populist movements to actually win an election.

Indeed, Brexit and global security were flagged by King Willem Alexander in his annual speech on Tuesday as challenges to the country.

“The risks and uncertainties facing our open and internationally oriented economy come mainly from abroad,” the monarch said in a speech written for him by the government, citing Brexit as a chief risk. “The United Kingdom is an important trade partner and Brexit will cost jobs in our country. The government’s aim is to maintain its strong economic ties with the U.K.”

Despite that, the Dutch economy is forecast to grow 1.7 percent next year, he said, adding that the financial crisis is “behind us.” Brexit knocked 0.4 percentage point off of next year’s growth estimate, the budget said, though the longer-term impact is still unclear. The government expects annual growth of 1.7 percent on that basis over the medium to long term, it said in the budget.

Wilders disagreed with the king’s assessment, calling it a “fairy tale” in comments on national broadcaster NOS. Many agree with him: a poll for Dutch television published Monday found 70 percent of respondents have a pessimistic view of the country’s future.

“The Dutch economy is growing; on average people are better off than four years ago but at the same time there are big differences between various groups in society,” Harald Benink, a professor of banking and finance at Tilburg University, said before the budget was released. “Given the current state of the economy, Rutte will be able to capitalize on this and has a good chance to become prime minister again.”

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