Anti-austerity in the Eurozone from Holland to Hollande

natalie hamill, 25 April 2012

By Lucy Hatton

The collapse of the Netherlands centre-right coalition government marks the latest in a long line of Eurozone governments to be brought to its knees by the debt crisis plaguing the EU. The implementation of austerity measures proved too much for the government of Prime Minister Mark Rutte, which has been in power since October 2010, and consequently, the future of the fiscal compact has been brought into question.

The demise of the Dutch cabinet appears to be at the hands of one man: Geert Wilders, leader of the Dutch People’s Freedom Party (PVV). The Dutch governing coalition began to unravel when one of the PVV’s MPs, Hero Brinkman, left the party in despair of its leadership. He stated that “I can no longer function in a party that completely centres around one person”. Brinkman has long campaigned for improvements in democracy within the PVV party, which has no members, no internal elections, and no youth movement. It is essentially a one-man endeavour. Until Brinkman’s departure, the PVV party was keeping the coalition government afloat, however, his exit meant that the government’s support diminished to exactly half of the 150 seats in the Staten Generaal, which in political terms is considered an unsustainable minority.

Rutte’s resignation became inevitable over the weekend after Wilders walked away from negotiations on the implementation of austerity measures in the Netherlands, which are necessary under the Stability and Growth Pact. It is a requirement that the national debt must not exceed 3 per cent of GDP, which meant that approximately €14billion of cuts were required in the Dutch budget for 2013. Wilders claimed that these cuts would hit pensioners the hardest and affect growth, and laid blame for the crisis with the EU when he proclaimed “we will not accept to have our people bleed at the hands of bureaucrats in Brussels”. The irony in this statement lies in the fact that, as EU Commission spokespeople have continually reiterated in the face of Wilders’ criticism, the 3 per cent rule was created not by the Commission but by an agreement between all member states at the June 1997 meeting of the European Council in Amsterdam, chaired by the Netherlands during the Dutch EU presidency. Wilder’s antagonism towards the negotiations is reported to come from the fact that he has been denied his demand for a referendum on leaving the euro and re-introducing the Dutch Guilder. Nevertheless, only last week politicians remained optimistic that the parties would reach an agreement on the 2013 budget, a draft of which must be submitted to the European Commission by 30 April, despite warnings from leader of the Green Left party Jolande Sap that “the fate of the country lies in the hands of one man only, Geert Wilders”.

However, optimism soon faded as Wilders abandoned negotiations and withdrew his support for the government. Questions are now being raised about what this political crisis means for the future of the fiscal compact. Rutte will remain in a care-taker role until elections are held, and still needs to prepare a budget to be sent to the Commission by Monday. Nevertheless, the crisis places the approval of the fiscal compact in the Netherlands in jeopardy. Germany insisted on the introduction of the compact to cut borrowing immediately, and it was hoped that this would restore stability to the Eurozone. However it is doing the opposite.

The Netherlands is not the first government to be undermined by the fiscal compact; Rutte is not the first politician to be forced to resign over its ratification. The Greek, Portuguese, Slovakian and Slovenian governments all succumbed to pressures related to the crisis in 2011. However, the Netherlands could not single-handedly derail the ratification of the compact as only 12 of the 17 Eurozone countries need to approve it for it to come into force. Nevertheless, when a core, northern, Eurozone country, the ally of Germany in the pursuit of the fiscal compact, is unable to approve its introduction, it is a damning statement to the rest of the Eurozone, particularly those members that are less financially stable than the Netherlands and those that have been more wary of the fiscal compact.

With Francois Hollande’s policy of renegotiating the fiscal compact seeming ever more popular in France, as his defeat of Sarkozy appears a distinct possibility in the second round of the presidential election in two weeks’ time, the people of Europe are clearly unimpressed with the EU’s approach and are standing up against austerity measures. And at the front of them is the apparently most influential man in the Netherlands right now: Geert Wilders. As Maxime Verhagen, the leader of the Christian Democrats in the Dutch coalition, remarks, “the hope for a strong response to the crisis has been drilled into the ground by Wilders”. Unfortunately, this may be true not just for the Netherlands, but for the entirety of the Eurozone.