x Abu Dhabi, UAEThursday 27 July 2017

Dutch government collapses after austerity talks fail

The Dutch government, one of the most vocal critics of European countries failing to rein in their budgets, quits after failing to agree on a plan to bring its own deficit in line with EU rules.

THE HAGUE, NETHERLANDS // The Dutch government, one of the most vocal critics of European countries failing to rein in their budgets, quits after failing to agree on a plan to bring its own deficit in line with EU rules.

Queen Beatrix's office said she had accepted the resignation of the prime minister, Mark Rutte, and his Cabinet after Mr Rutte informed her talks on a new austerity package collapsed over the weekend.

Mr Rutte is to debate with parliament tomorrow on whether and how his caretaker government can still improve the budget, and when to schedule new elections. No date was announced, but opposition lawmakers called for a vote in late June.

Opposition Labor Party leader Diederik Samsom accused Mr Rutte of "dropping the ball at the worst possible moment" for the Dutch economy and demanded elections as early as practicable.

"We have to deliver clarity to the country as soon as possible," he said.

The Dutch government collapse came a day after the first-round election victory of France's socialist candidate Francois Hollande, who has said he wants to focus less on austerity and more on economic growth.

The two developments call into question whether budget-cutting policies that are causing trauma in countries such as Greece, Spain and Portugal can be enforced even in "core" European countries such as France - or in the Netherlands, one of the few along with Germany to maintain an AAA credit rating.

Mr Rutte's hopes to clinch a deal to lower the deficit to within the EU's 3 per cent target evaporated Saturday when his most important political ally, the right-wing eurosceptic Geert Wilders, cut off talks, saying a slavish adherence to European rules was foolish and would harm the Dutch economy.

It doesn't make sense "to suffer for the sake of the dictators in Brussels," Mr Wilders said.

Many agree the target is too aggressive, including the government's own economic think tank the Central Plan Bureau. Others, such as Dutch Central Bank President Klaas Knot, say meeting it is vital to keep the country's financial reputation intact.

European Commissioner Neelie Kroes called Mr Wilders a hypocrite, since the Netherlands itself, along with Germany, had been one of the loudest in demanding Brussels adopt the 3 per cent deficit limit in the first place.

"Pointing to Brussels now is dumb, it's untrue, it's distracting, and it doesn't solve anything," said Mr Kroes, who is a member of Mr Rutte's free-market VVD party.

A spokesman for the German finance ministry said that despite the seemingly negative developments, approval for European austerity is actually "increasing."

"We should not now simply let ourselves be thrown off track by daily developments," Martin Kotthaus told reporters in Berlin.