Political risks to watch in the Netherlands

Posted: November 10, 2012 in Finance and Business, Politics

Original Reuters article found here.

Thu, Nov 1 2012

AMSTERDAM, Nov 1 (Reuters) – Dutch Prime Minister Mark Rutte, one of the few European Union leaders to survive an election during the euro zone crisis, has agreed to form a pro-EU, pro-austerity coalition with his close rival, Labour, following the general election on Sept. 12.

As one of the few AAA-rated euro zone countries, the Netherlands is expected to remain committed to a policy of fiscal discipline and remaining a close ally of Germany.

COALITION AGREEMENT

Rutte and Labour leader Diederik Samsom reached a coalition deal much faster than expected after the election, and agreed to budget cuts amounting to 16 billion euros ($20.76 billion) over the next four years, and structural reforms including a reduction in tax breaks on home loans.

What to watch:

– Whether both the lower and upper houses of parliament pass the budget cuts.

EURO ZONE CRISIS

The Netherlands is expected to remain committed to tight fiscal policies to tackle the euro zone’s debt crisis. Like other euro zone countries, it must approve an EU fiscal treaty which will enshrine balanced budget rules in national law.

Parliament, which has been critical of euro zone bailouts in the past, has supported all such measures so far. Rutte said in his election campaign he would not give more money to Greece, while Samsom said Greece should be given more time to reform.

What to watch:

– Political and public support for euro zone bailouts

BUDGET DEFICIT

The 2013 budget, agreed by an ad hoc coalition in April after Rutte’s government fell, aims to bring the deficit down to 2.7 percent of GDP with 12 billion euros in tax rises and spending cuts.

The additional 16 billion euros in budget cuts are expected to bring the deficit down to 1.5 percent of GDP by 2017, according to the CPB, the state agency charged with assessing government economic policy.

What to watch:

– Implementation of agreed budget cuts

– Support for other reforms and spending cuts

– Strikes or protests over budget cuts

SOCIAL POLICIES

The Dutch are divided over immigration and the country’s international profile. The new government is expected to backtrack on some anti-immigration policies which were promoted by populist politician Geert Wilders and try to improve the country’s image overseas.

But according to the new coalition agreement, clothing that covers the face such as Muslim veils will be banned in schools, hospitals, public transport and government buildings. Anyone who wears such clothing, or who does not speak Dutch, will not be entitled to receive social security.

 

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