by Frank Thomas
Mr Rutte (R) and Maxime Verhagen have been in coalition since October 2010
(also see related New York Times article)
Seven weeks of Government talks have broken down on the issue of more spending cuts – above €18 billion already agreed upon giving a 4.6% budget deficit in 2013 – to reach 3% EU deficit limit. This brings Holland’s credibility at risk as it has been the fiercest promoter of the 3% deficit rule and the severe austerity plan for Greece. Result? The coalition government of the conservative VVD party and centrist CDA party has fallen Saturday. This minority government has depended on an agreement with the ultra right PVV party, the Freedom Party, to achieve a required parliamentary majority (by the slim margin of one vote).
This development illustrates what I’ve been saying for quite some time about the built-in balancing, self-correcting , countervailing features of European coalition governments … a governance system that moderates and can prevent excessive ideological swings left or right. Not even a Paul Krugman or Joseph Stiglitz fully comprehend this European coalition governance dynamic, let alone the U.S. media or average American. When a coalition government can’t agree on fundamental issues, it can fall. New elections are then held where the people decide. It’s called democracy.
So, the Dutch government fell yesterday, necessitating new elections in September or October. After 7 weeks of negotiations, the ultra-conservative PVV party, led by the anti-Islam, anti-immigration, anti-Brussels Geert Wilders, concluded that added budget cuts to reach the 3% deficit level in 2013 fall disproportionately on pensioners and low-income people. Wilder’s party and other leftist-leaning Dutch parties are of the opinion the budget cuts to bring deficits to 3% of GDP should be taken in measured concrete steps over 3 years and that there should be more incentive and investment emphasis on encouraging job growth. Where in America today would you hear of a Republican conservative promoting a combination of right and left policy actions as Wilders does? This can happen under coalition government systems which put more pressure on balanced, effective compromise than our U.S. “winner-take-all, pay and play” autocratic government decision-making in the hands of the ultra-rich and “corporate citizens” who are simultaneously bleeding the federal government by paying little or no taxes.
I’m not a fan of Geert Wilders although I agree with his position about the 3% deficit timing. He’s too much of a soloist, populist politician for my likes who has the “my way or the highway egocentric syndrome,”so diametrically unDutch in character. He’s a control freak who wants to micro-manage everything from A to Z, including the activities of his own party members. His wild one-liner remarks have potential of doing real damage to Holland’s commercial export potential (with Turkey, for example) and ageless reputation for being a tolerant nation for those who integrate well, learn the language, and follow the rules.
New elections will likely result in a more balanced, hopefully stable, coalition scenario along some variation of the following lines:
- VVD :conservative party led by Mark Rutte with ±1/3 of votes in new elections
- SP : left party led by Emile Roemer with ±1/5 of votes in new elections
- PVDA : labor party led by Diederik Samson or possibly a coalition of 2 parties with ±1/5 of votes in new elections
This brings me to another example of the self-correcting dynamic of coalition governance systems. Over the past two years, the SP left-leaning party led by Emile Roemer has zoomed in popularity. The ultra right PVV party of Wilders has peaked and is now almost disintegrating. The PVDA labor party has lost much ground but shows promise of new life with a clever, just nominated young leader (also educated in the sciences). Of course, I know the typical Republican demagogic remark would be that, “Holland is thus going more socialistic in the direction of bigger government and higher taxes for the rich.”
Nothing could be further from the truth. The SP party and other parties such as PVDA labor party, D66 centrist party, the Green leftist party and the the SPG centrist party fully recognize the utter necessity of getting the country’s fiscal house in order for future generations and to retain its excellent financial rating. Holland has been a leading example of entrepreneurship, financial soundness and societal equity for generations. BUT, the above-mentioned parties, including especially the SP, correctly want this financial austerity executed in a better-timed, wisely balanced humanistic manner that does not take the mass of citizens down the “race to the bottom” … a societal devastating disease systemically paralyzing and polarizing America so completely for so long now.
The extremely important $64,000 dollar question is: Can the current interim coalition of VVD and CDA join with others parties and act responsibly to pass an intelligent budget plan of pain and gain fairly shared that sets transparent goals of where the country needs to go?
This should be done NOW and NOT postponed until the new coalition is formed in the September or October elections. Will the usually sound Dutch values of political sensibility, fairness, and pragmatism come forward in reaching a budget compromise in the interests of all Dutch citizens? Having lived and worked over 30 years in Holland, I’m eternally hopeful this will happen!
P.S.
Following is a more detailed release April 22nd , “Dutch Government Falls Over Budget Talks” by Matt Steinglass of the Financial Times in Amsterdam.
There are some inherently democratic lessons and processes here our U.S. leaders might learn from.
The Dutch governing coalition collapsed on Saturday when far-right politician Geert Wilders pulled out of budget cut talks, saying it was not in the Netherlands’ interest to meet the deficit of three per cent imposed by the new European fiscal pact.
EU-imposed austerity measures have cost leaders in southern European countries, including Greece, Italy, and Spain, their jobs. With the fall of the conservative Dutch government, and the possibility that Nicolas Sarkozy may lose the French presidential election that begins on Sunday, the damage seems to have spread to Europe’s prosperous north.
Highlighting widespread voter anger over EU-imposed budget cuts, Mr. Wilders said he could not allow Dutch citizens to “pay out of their pockets for the senseless demands of Brussels.”
“We don’t want to follow Brussels’ orders. We don’t want to make our retirees bleed for Brussels’ diktats,” Mr. Wilders said.
The loss of Mr. Wilder’s support left the conservative government of Mark Rutte, Prime Minister, with just over a third of the seats in parliament. Mr. Rutte and other party leaders said that made new elections inevitable. He is expected to offer his cabinet’s resignation to the Dutch Queen on Monday, but leave the cabinet in place as a caretaker government until elections are held, probably in September.
The fall of Mr. Rutte’s government is ironic because the Dutch were among the most vociferous supporters of strict budget limits during negotiations over Europe-wide fiscal reforms at Brussels summits last year.
After the slowing Dutch economy led the Netherlands’ own 2013 deficit estimates to jump to 4.6% of GDP, Mr. Rutte was forced in early March to launch negotiations with his coalition partners – the Christian Democrats (CDA) and Mr. Wilder’s PPV party, the Party of Freedom – over new cuts.
While awaiting elections, the conservative caretaker government will be forced to seek agreement on a budget with leftwing opposition parties. The leaders of the opposition Labor and left-conservative D66 parties said they might back some cuts with a view to long term deficit reductions below 3%. But they said they were not interested in ensuring that the deficit met the 3% limit in 2013.
D66 leader Alexander Pechtold said the government would need to go “hat in hand” to Brussels to see whether a smaller package of cuts would be acceptable. But a person with knowledge of the government negotiations said that the Conservatives and Christian Democrats were both determined to reach the 3% goal, and that it might be possible to create shifting coalitions to pass different measures to reach that goal.
The fall of the government has unpredictable ramifications for the future of Mr. Wilders. On Saturday, Mr. Rutte and Christian Democrat leader Maxime Verhagen rushed to paint him as irresponsible for having triggered the collapse of talks.
Mr. Rutte said the negotiators were “completely done.”He said an agreement on budget cuts had already been reached when Mr. Wilders abruptly said Saturday he was no longer willing to approve them. Exiting the government at this stage will allow Mr. Wilders to disclaim any responsibility for unpopular budget cuts. But the biggest winner in elections could be the far-left eurosceptic Socialist Party (SP), which has seen its support rise to as much as 20% (if not 30%) of the electorate over the past year.
Meanwhile, Dutch analysts said the inability of even the prosperous, deficit-averse Netherlands to generate voter support for Europe-directed budget cuts called the sustainability of the EU fiscal pact into question.
“Enforcing the pact would always be difficult. Punishing countries is a naïve concept,” said Arnold Boot, a professor of finance at the University of Amsterdam. Mr. Boot said fiscal harmonization would be impossible once the European economy returns to normal growth, but that trying to execute it in times of crisis causes “undue pain, which would lead to too much opposition to EU enforcement.”
Frank Thomas
April 22, 2012
PS see Frank's post postscript here.
