Netherlands could pass some budget cuts before Sept poll: finance minister

Reuters News
Posted: Apr 27, 2012 3:17 PM
Netherlands could pass some budget cuts before Sept poll: finance minister

By Gilbert Kreijger and Anthony Deutsch

THE HAGUE (Reuters) - The Dutch parliament may approve some of the last-minute cuts agreed on to save its budget from breaching EU rules ahead of a September 12 election, the finance minister said on Friday, protecting the country's credentials as a champion of fiscal discipline.

The minority government collapsed at the weekend in a row over the budget cuts, which are required if the Netherlands, one of the last triple-A rated euro zone members, is to meet strict European Union limits on budget deficits.

Led by Finance Minister Jan Kees de Jager, the government won support late on Thursday from three small opposition parties for a revised budget package which includes an increase in value added tax, extra taxes on fossil fuels, alcohol and tobacco, and cuts in healthcare.

The measures also include a two-year pay freeze for civil servants and a doubling of a new tax on banks.

Unions and other opposition parties slammed the deal, saying it would hurt growth and warning it would be torn up after the election.

But a new opinion poll carried out after the budget deal and published on Friday showed that the two government parties and three opposition parties that supported it would together command a slim majority in parliament if an election were held now, winning a total of 76 out of 150 seats.

Prime Minister Mark Rutte's Liberal Party and the opposition Socialist Party - which did not support the budget deal - are joint lead in the poll with 31 seats each.

The opinion poll also showed that Dutch voters are supporters of fiscal discipline.

While only a slim majority, 51 percent, of respondents thought the package of tax hikes and spending cuts agreed on Thursday was a positive development, that dwarfed the 28 percent of voters who opposed it.

There is broad support for all the measures proposed: Only 36 percent of those polled thought the most unpopular measure - a 2 percent hike in the value-added tax rate - was "absolutely unacceptable."

There was also evidence of impatience with the populist Freedom Party, whose decision to pull the plug on budget talks last weekend led to the government crisis. Two thirds of voters said the party was the biggest loser of the past week.

The new budget deal meant the Netherlands, a core member of the euro zone, would be able to meet an April 30 deadline for presenting proposals to Brussels on its plans for meeting EU deficit targets, averting an embarrassing crisis.

The European Commission said late on Friday it welcomed the agreement and that it would assess the proposed budget in May, together with the proposals made by other countries.

"It underlines the strength and credibility of domestic institutions in not shying away from difficult choices that inevitably have to be made," the EU's top economic official Olli Rehn said in a statement.

Rehn added the Commission would assess the Dutch program putting particular emphasis on the quality and sustainability of the adjustment measures in the medium-term.

De Jager said he would send the new budget plan to Brussels at the weekend, and that he expected a rise in value added tax to take effect on October 1.

It is still unclear how many of the measures the country can implement before the September 12 elections, and what will happen to the steps yet to be taken when a new cabinet takes office.

The Dutch parliament, which has been critical of euro zone bailouts but has so far supported all such measures, also has to give final approval to the EU fiscal treaty, which will enshrine balanced budget rules in national law.

De Jager said he expected the Dutch parliament to approve the EU fiscal treaty, but did not say when.

In the past the minority government relied on the support of the anti-euro Freedom Party for a majority in parliament, except on European issues when it relied on the opposition Labour party.

"Until now, the European agenda of this cabinet has been approved by the opposition when the Freedom Party did not support it. It seems to me that thanks to (Thursday's) agreement, the situation has improved instead of worsened," de Jager said.

(Additional reporting by Thomas Escritt and Robert-Jan Bartunek in Brussels; Editing by Sara Webb and Myra MacDonald)