IN A dramatic reversal of political fortune, the caretaker minority government in the Netherlands appeared last night to have secured a last minute deal in parliament on an austerity package which will reduce its budget deficit to the 3 per cent of GDP demanded by the EU.
A special late evening sitting of MPs was told by finance minister Jan Kees de Jager that agreement had been reached in principle between the two government parties, the Liberals and the Christian Democrats, and three smaller parties, GreenLeft, the centre-left D66 and Christian Unity.
Prime minister Mark Rutte described the agreement as “a fantastic result” – and proof to the financial markets that the country was in control of its finances.
The five parties between them have a slim majority, 77 seats in the 150-seat parliament, enough to secure the passage of the budget cuts, many of which remain highly controversial. However, the country will still go to the polls in a general election, probably on September 12th.
Last night a spokesman for the EU Commissioner for Economic and Monetary Affairs, Olli Rehn, welcomed the willingness of the political parties to readdress the crisis – and described the agreement in principle as “encouraging”.
The government collapsed last Monday after seven weeks of talks on the austerity deal when the right-wing Freedom Party, led by Geert Wilders, walked out on the grounds that the cuts were too stringent and would disproportionately affect the least well-off, including pensioners. However, last night’s surprise deal effectively sidelines Mr Wilders for the first time in these negotiations – and puts Mr Rutte’s Liberal Party, showing well in polling even since the government’s fall, in a strong position.
If it proves solid, the deal will also significantly increase the Netherlands’ chances of retaining its triple-A international credit rating – and, crucially for Brussels, will hold the line on the controversial 3 per cent deficit limit which many other euro zone countries had hoped to see relaxed.
The cabinet meets this morning for a briefing by Mr de Jager – who has been one of the most outspoken critics of “budget sinners” in “southern European countries” – and to consider the detail of the package before it’s sent to Brussels on Monday.
Although the full details had not been released last night, it is understood key elements of last week’s outline remain in place – including an increase in the pension age, changes in redundancy legislation, reduced tax breaks on mortgages, and more expensive healthcare.
The opposition Labour Party was not involved in the final deal. New leader Diederik Samsom said that although he was “willing to move”, he believed cuts leading to a deficit of 3.6 or 4 per cent should be adequate – and anything more would hinder economic growth and potentially cost jobs.
“This 3 per cent deficit should not have to be totemic,” he declared.
