EU clock ticking for Dutch budget talks

Reuters News
Posted: Apr 26, 2012 7:29 AM
EU clock ticking for Dutch budget talks

By Gilbert Kreijger

AMSTERDAM (Reuters) - The Dutch caretaker government scrambled on Thursday to strike a deal with opposition parties on a 2013 budget that would cut the deficit, before an EU deadline, with ministers and opposition politicians saying there was scope for progress.

Failure to come up with an acceptable deal by Monday would lead to months of uncertainty until elections in September, adding to existing angst in financial markets about the sustainability of Spanish and other euro zone debt.

Prime Minister Mark Rutte's government fell apart at the weekend when its main ally, Geert Wilders' Freedom Party, refused to agree to a deal that would cut more than 14 billion euros ($18 billion) off the annual budget and bring the deficit down to the EU limit of 3 percent of domestic output next year.

"I have had good, constructive talks with a number of factions," Finance Minister Jan Kees de Jager told reporters.

De Jager's and Rutte's immediate challenge is to win parliament's support so they can submit the plans to Brussels by April 30. A parliamentary debate was due later on Thursday.

Some small parties would also like to reduce the deficit to 3 percent but the largest opposition parties, including Labour and Wilders' Freedom Party, think 3.6 or 4 percent is good enough and cutting more would hurt growth and jobs.

Labour leader Diederik Samsom was "willing to move", his spokeswoman said, though she added the caveat that it "has to happen in an honest way". On Tuesday, Samsom said his party wanted more time to reduce the deficit to 3 percent.

Financial markets have been unsettled by the inability of one of Europe's few remaining AAA-rated countries to agree the sort of deficit-cutting it has demanded from other governments.

Christian Democrat De Jager said he would continue talks later on Thursday with opposition parties Democrats 66, Green Left and Christian Union, the ruling coalition's Liberals and Christian Democrats, and possibly one or two other parties.

With the support of the three opposition parties, the caretaker government would have a majority of 77 seats in the Dutch Lower House, which has 150 seats in total.

"I cannot say there is the prospect on an agreement. I can absolutely not say that, but I see reason to continue the talks," De Jager said.

ING economist Maarten Leen said it was positive political parties were willing to come to an agreement but he did not expect a deal which would lower the Dutch deficit to 3 percent of gross domestic product next year.

"I think they'll arrive between 3.5 and 3.75 percent next year," Leen said.

The Dutch impasse could have an impact on budget discipline elsewhere in Europe, he said.

"There is a risk you immediately start watering down the rules of the game. The Netherlands has a role in this but, more important will be the direction in France," Leen said.

French voters seem poised to chose economic growth over austerity by voting for Socialist presidential candidate Francois Hollande over conservative President Nicolas Sarkozy on May 6.

Until now, the Dutch have been among the most hardline euro zone members in calling for fiscal discipline.

"It was the Netherlands which has always pushed euro zone countries not to exceed that budget deficit level," Germany's Finance Minister Wolfgang Schaeuble was quoted as saying in Dutch daily De Telegraaf. "There has to be a sound budget, coupled to fiscal discipline."


The Netherlands, which has a relatively low level of state debt of 65.2 percent of GDP, has been in recession since July, and the budget deficit is expected to be 4.6 percent of GDP next year without spending cuts.

De Jager, who has loudly berated "budget sinners" in Europe for letting debt run up, said he would also look if it was possible to make an agreement with Labour, the largest opposition party which has 30 seats in the Dutch Lower House.

Liberals faction leader Stef Blok reiterated he wanted to reduce the deficit to 3 percent next year, and leaders of Democrats 66 and Christian Union said they felt responsible for the 2013 budget.

"You don't have to doubt that very hard work is being done by people who have a tremendous sense of responsibility," Christian Union leader Arie Slob told NOS television.

As elsewhere in Europe, there is public discomfort with sharp austerity.

A poll by Maurice de Hond showed 58 percent of those surveyed agreed the Dutch deficit should be cut to 3.5 percent at the most, while 44 percent thought it should be cut to 3 percent or lower.

(Reporting by Gilbert Kreijger; editing by Jeremy Gaunt/Mike Peacock)