The Netherlands faces the politics of austerity

By Famke Krumbmüller

The Dutch have long been one of the eurozone's and the EU's most reliable members. Since the introduction of the euro in 2000, the country has easily met EU economic targets for the maximum allowable budget deficit (3 percent of GDP) and national debt (60 percent of GDP), generally turning in better numbers than even Germany. That policy position has been supported by broad consensus among political parties and the general population. But in a timely reminder that the politics of austerity are tough, even for fiscally conservative countries, the Dutch political system is now wracked by some of the same tensions that are roiling politics in the EU's peripheral members. The Netherlands faces important general elections in early September as a consequence of failed budgetary talks. The Socialist Party is polling well with a populist policy platform that resists ongoing fiscal austerity, with possible implications for broader management of the EU's ongoing crisis.

In the early days of the eurozone's predicament, the Dutch were in the forefront of the drive for austerity. In September 2011, the minority coalition government led by Prime Minister Mark Rutte slashed €18 billion from the budget. And when the economy slid into recession in spring 2012, the government was forced to cut another €12.4 billion in spending. But Rutte's coalition made up of the People's Party for Freedom and Democracy (VVD) and the Christian Democratic Appeal (CDA) with parliamentary support from far right Party of Freedom (PVV) collapsed at the end of April when Geert Wilders, the PVV's leader, withdrew its support. He claimed that the budget cuts would hurt growth, purchasing power, and the elderly, a populist tactic designed to attract voters fed up with further austerity. A broad coalition of five parties (including the VVD and the CDA) passed the budget shortly after Wilder's defection, but the minority coalition's collapse echoed the messy politics of austerity that are playing out across the EU's peripheral countries and which provide an opportunity for parties at the extremes of the political spectrum to gain ground. 

The next challenge comes with the 12 September elections. So far it looks as though the politics of austerity are favoring the leftist Socialist Party, which is leading in the polls after winning support from Labor Party (PvdA) voters disenchanted with their party's backing of the pro-austerity Rutte government on European issues. The Socialists are running on a platform that rejects the EU-imposed austerity measures and any further transfer of sovereignty. The party argues for policies that favor growth and social agendas. At the other end of the political spectrum, the PVV continues to maintain solid support with its anti-European platform that includes a euro exit. Together these two fringe parties currently have support from about one-third of voters. Both parties (but especially the PVV) have populist tendencies and aim to capitalize on Dutch voters' disenchantment with austerity and any discomfort with financial support for peripheral countries that provides few obvious domestic benefits.  

The next Dutch government will continue to be pro-European and support sound public finances, but voter concerns will make it more difficult for it to justify continuing hardship for the sake of the EU. This outcome is likely because the Dutch political system features a number of small centrist parties that will always be needed to build a ruling coalition. That dynamic will likely ameliorate any dramatic shift in policy. As a result, public finances will return to health, but perhaps not on Germany's and the European Commission's preferred time line, and Berlin may lose the support of what has been a close ally in the drive for austerity. Nonetheless, strong supranational supervision will remain a precondition for further financial or monetary policy integration, in part to ensure that Germany and France do not break their own rules. But the next Dutch government will find it difficult to secure domestic support for any further transfer of sovereignty to the EU. The Socialists' increasing popularity will also encourage a debate on the social consequences of the eurozone crisis and the European project in general.