Much ado about nothing? What the Dutch elections could mean for Europe and the euro

(PresseBox) ( London, )
On 12 September, the Netherlands will hold general elections. The elections will be watched closely because of the country's position as an important creditor country in the eurozone and a traditional ally of Germany in economic affairs.

The most likely outcome remains a centrist, pragmatic coalition, which clearly is the preferred option in Brussels and Berlin. The Dutch elections are therefore unlikely to radically change the immediate political dynamics of the eurozone crisis. The country is likely to continue to oppose more bailout cash for Greece or any topping up of the eurozone's bailout funds and remain a steadfast supporter of austerity in the struggling eurozone economies.

In the medium to long term, however, the Netherlands could well be on the path to becoming a more assertive - and far more complicated - EU partner. With future decisions on potential eurozone debt pooling to come and the prospect of enhanced EU powers over national budgets (including the Netherlands'), Dutch public opinion and the more or less EU-critical parties such as the Socialists and PVV are likely to shift the country in a more sceptical direction.

What do the opinion polls say?

Although the EU-critical left-wing Socialist Party has had a strong election campaign, recent polls have seen a shift back towards the centre with the centre-left Social Democrats (PvdA) overtaking the Socialists (SP) to become the main challengers to Prime Minister Mark Rutte's VVD party (centre-right).

According to the latest Ipsos politieke barometer (8 September) the VVD and PvdA are neck and neck on 35 seats each. The Socialists (21) and Geert Wilders’ PVV (19) are vying for third place, with the Christian democratic CDA (13), left-liberal D66 (11), the Christian Union (CU) (6) and GreenLeft (4) all expected to figure. The poll also revealed that as many as 43% of voters are still undecided.

What are the coalition options?

There are 150 seats in the Dutch lower chamber – the Tweede Kamer and 76 seats are needed to gain a majority. This leaves at least three main possibilities:

1) A centrist ‘grand’ coalition The most likely outcome remains a centrist coalition, which clearly is the preferred option in Brussels and Berlin, with VVD, PvdA and CDA and could also include D66 if needed for majority. This could also feature the Christian Union – though the PvdA is likely to oppose the latter on the grounds that it would push the Coalition too far to the right.

2) A centre-left+ coalition, with the Social Democrats, the Socialist Party, CDA, and the GreenLeft. This would, at best, narrowly obtain a majority and might in reality need the support of D66 as well. It is questionable, however, whether the CDA would go for it, and whether other parties will want to have what is perceived as a far left party in a dominant government position.

3) A ‘purple coalition’, with VVD, PvdA and D66, could possibly muster a majority. However, in the 1990s, similar constellations were perceived as increasing the gap between voters and the government, and it is likely to be resisted by Rutte and others.

Other coalitions are, in theory, possible but remain unlikely: the gap between the VVD and Socialists looks too wide, while it's unlikely that the VVD will want to rely on Geert Wilders again, after he effectively brought down the last government in the spring by opposing proposed budget cuts. There will also be a desire to avoid another minority government.

Although the parties will to want to avoid drawn out negotiations, particularly in light of the decisions that needed to be taken as a result of the eurozone crisis, it could take months to agree a coalition. The last election preceded four months of negotiations before a government was formed. The record is seven months (in 1977).

How important is ‘Europe’ in the election?

As in most elections, the economy is at the top of the agenda. Dutch PM Mark Rutte has promised tax cuts, while pushing for more personal choice in healthcare. Pensions have also been a prominent theme, with the Dutch – like many Europeans – fearing dwindling pensions as the economy worsens and the population gets older.

However, Europe has featured prominently as well – like elsewhere in Europe, domestic politics and economic matters are becoming increasingly linked to the eurozone crisis (after all, the last government fell after Geert Wilders withdrew his support for an EU-mandated austerity budget).

With respect to individual parties, Socialist leader Emile Roemer has been the most effective at tapping into voters’ anxiety over the crisis and the bailouts, although his performance in televised debates has hurt his party’s poll ratings. He strongly opposes the EU fiscal pact and has said he would “never pay” EU fines for breaking European fiscal targets. Roemer has also said that any transfers of power to the EU would need to be put to voters in a referendum, a notion similar to the UK Coalition’s EU ‘Referendum Lock’.

Dutch PM Mark Rutte has repeatedly said that Greece should be given no more financial support (although possibly more time). He has also warned that a Greek exit might be inevitable – something which drew rebuke from the PvdA, D66 and the Christian Democrats. Geert Wilders, too, has played the Europe-card heavily during the campaign (see below).

If Europe is so important why is Wilders doing so poorly?

Contrary to what one might have expected if Europe and the euro were important to Dutch voters, Wilders has had a pretty mediocre campaign after vowing to turn the election into a “referendum” on Europe. According to the polls, he is on course to fall 4-5 seats short of his 2010 result of 24 seats.

Much of this is due to the perception that Wilders was irresponsible to pull the plug on the last government and the re-emergence of the Socialists as a means of registering a protest vote against the parties of the centre and the euro bailouts/austerity.

The traditional parties of the centre have also increasingly taken on aspects of Wilders’ narrative on Europe. Neither VVD nor the PvdA are uncritically in favour of everything European, with the VVD making several critical interventions: refusing a penny more to Greece, on the need to limit EU powers in some areas and reduce the EU budget. A huge question will be if these two parties will see an electoral advantage in becoming more EU-critical in light of more potential bailouts, a stalling economy and an ever vocal EU-critical fringe.

There are several trends to look out for:

Dutch public opinion on Europe: If no solution is found to the crisis, public support for ‘Europe’, in various forms, could continue to drop. While traditionally one of the most pro-EU countries, support for the EU has steadily dropped in the wake of the crisis, while an increasing majority opposes further bailouts.

In November 2007, 77% of Dutch voters though that EU membership was a ‘good thing’, according to the European Commission’s Eurobaromoter polling. By May 2011 this has fallen to 68%. A separate, more recent TNS Nipo poll published in June 2012 found that just 58% of Dutch voters were in favour of EU membership – a huge drop from 76% in May 2010.

The crowding out of the centre: The eurozone crisis may well be exacerbating the crowding out of the Dutch centre – a trend triggered by the emergence of the Pim Fortuyn List (LPF) in the early 2000s. The CDA, the party of Jan Peter Balkenende, who was Prime Minister between 2002 and 2010, has been increasingly squeezed out.

Although this election could see the major centre parties stabilise their share of seats in parliament, the centre is likely to remain weak. As elsewhere in the eurozone, disparate coalition governments, that have to cope with divided parliaments, invariably make it more difficult to reach quick decisions – and implement decisions that EU leaders have reached. There is also a strong danger of even greater disconnect between voters and politicians if the coalitions of the centre force through deeply unpopular decisions.

The Dutch economy stalling: if the economy continues to worsen, and are concerns about the housing market, EU-critical parties on left and right could be given a massive boost – the Socialists as a result of an anti-austerity backlash, Wilders from nationalist populism.
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