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Analysis

Dijsselbloem’s Eurogroup role in jeopardy

Long wait before next Dutch government is formed

by Roel Janssen in The Hague

Mon 20 Mar 2017

Jeroen Dijsselbloem’s role as chairman of the Eurogroup of finance ministers is in jeopardy after his Labour party (PvdA) lost 29 of its 38 seats in the Dutch parliamentary election. He will lose his post as finance minister once a new government is formed, probably under Mark Rutte, the present prime minister. This opens the way for Luis de Guindos, the Spanish economy minister, to seek the Eurogroup leadership.

The PvdA was the biggest loser in the election. Dijsselbloem's party is unlikely to remain in government. He will stay as caretaker finance minister while coalition negotiations are underway and will continue to chair the Eurogroup until a government is formed, which could take months. What happens then is unclear.

He could see out his five-year term as chairman, which ends in January 2018, but other Eurogroup countries may not agree to this. The Eurogroup rules do not allow the chairmanship to pass automatically to the new Dutch finance minister. This opens the way for the baton to pass to a southern European country, which Spain has long sought. De Guindos will be a strong contender.

Rutte faces the arduous task of putting together a coalition. To achieve a majority in parliament he will need the support of three other parties.

Geert Wilders’ far-right Party for Freedom (PVV) did not live up to expectations at the polls but still holds the second highest number of seats. It will not find itself in power as other parties are not prepared to go into coalition with it.

The Dutch parliament continues to be broadly pro-European with only Wilders’ PVV and one or two fringe parties in favour of a ‘Nexit’ or leaving the euro. The pragmatic Rutte, having seen off Wilders, will undoubtedly use his renewed political clout in Brussels and may even be inclined to be more strongly pro-EU than before.

Rutte has accomplished a remarkable political feat, consolidating his conservative People’s Party for Freedom and Democracy (VVD), as the largest party, while halting the advance of Wilders. This loss of momentum for the populism that appeared to be sweeping across Europe has implications for the elections this year in France and Germany.

With many mid-sized parties in the new parliament, the formation of a government will be a complex undertaking. But the Netherlands always has coalition governments and the Dutch are used to lengthy negotiations before a cabinet is formed. There appear to be two possible coalitions: both would include the VVD, the Christian Democrats and the Social Liberals. The fourth party could either be the progressive Greens of Jesse Klaver, a young and promising politician who did exceptionally well in the elections, or the (protestant) Christian Union. There are fundamental differences between these parties and the challenge for Rutte will be to find common ground.

Unlike after the elections of 2012, when urgent action was needed to tackle the effects of the financial crisis, the Dutch economy is booming and the government budget is in balance. After four years of austerity, there is fiscal room to loosen the budgetary reins and this may ease Rutte’s task.

Roel Janssen is a Member of the OMFIF Advisory Board and an author of books on economic and financial affairs. He covered economics and finance for NRC Handelsblad, a Dutch daily newspaper, for more than 30 years.

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