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Analysis
New start for Dutch PM Rutte

New start for Dutch PM Rutte

Labour to the fore in new government
Hard line in euro crisis – but will they pay?

by Roel Janssen

Tue 13 Nov 2012

Mark Rutte, the conservative Dutch prime minister, has formed a new government that differs considerably from the one he led for the past two years. With a new coalition partner, the centre-left Labour Party, he has moved to the left on social and economic issues and has dropped the unproductive attitude towards Europe that characterised his first government.

In the September general elections, the two parties were the big winners and a coalition seemed unavoidable. Yet Rutte and Labour leader Diederik Samson, both in their early 40s, do share a broad conviction that after five prematurely-collapsed governments in the past 10 years, the Netherlands needs a stable administration that lasts the entire parliamentary period.

In six weeks they hammered out a government agreement – a speedy outcome in Dutch political history – that meets the demands of both parties. Rutte gets fiscal consolidation, bringing the budget deficit down to 1.5% of GDP in 2017. Taxes will be increased and expenditure cut by a total €16bn. Together with adjustments implemented by the previous Rutte government, this adds up to an unprecedented €47bn in spending cuts and tax hikes between 2010 and 2017.

In return, Samson’s Labour Party ensured that higher income groups will bear the brunt of changes to fiscal policy. The aim was to link health care contributions to income, resulting in considerable net income losses of up to 10% – a proposal that caused an uproar among conservative, well-to-do voters and sharply lowered Rutte’s and his party’s popularity. Within a week the newly-installed government was forced to retreat on this core issue of its fiscal policy, derailing its intended dynamic start.

On Europe, the new Rutte government differs fundamentally from the previous, which depended on the support of Geert Wilders’ anti-European Freedom party, which fared badly in the election, ousting him to the political margins.

‘Europe brought us peace, security and prosperity. When Europe does well, we do well,’ according to the political declaration of the new government. The new foreign minister and former diplomat, Frans Timmermans, of the Labour Party has strong pro-European convictions. The new finance minister, Jeroen Dijsselbloem, is from the same party: an experienced parliamentarian and trained agronomist, he is new to this field. As a fiscal conservative Dijsselbloem continues to preach stringency in the case of Greece, even though it is on the brink of default. But, like so many creditor governments, in the end the Netherlands will end up agreeing to pay all the same.

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