REUTERS - Austerity-minded Liberals won a narrow one-seat lead in the Dutch election, putting them in pole position to form a coalition that must tackle a ballooning budget deficit, preliminary results showed on Thursday.
The election ousted Christian Democrat Prime Minister Jan Peter Balkenende from eight years in office, and Geert Wilders's anti-immigration Freedom Party nearly doubled its seats to be the third-largest parliamentary group and a possible kingmaker.
With 98 percent of the votes counted, the rightist-leaning Liberals had 20.4 percent of total votes or 31 seats in the 150-member parliament against 19.6 percent or 30 for the Labour Party, which wants slower and fewer cuts to tackle a deficit expected to reach 6.6 percent of GDP this year.
This would give Liberal leader Mark Rutte a mandate to form a coalition and become prime minister, but sticking to his austerity policies could prove tough because he needs at least three other parties to secure a parliamentary majority.
Earlier, exit polls had showed the Liberals and Labour running neck-and-neck in an election dominated by debate on fiscal austerity after the euro zone's stability was threatened by sovereign debt woes plaguing Greece.
Balkenende conceded defeat for his Christian Democrats when voters turned against the party, nearly halving its seats from 41 to 21. He resigned as party leader.
Wednesday's election was triggered when his Christian Democrat-Labour coalition government collapsed in a row over extending the deployment of Dutch troops in Afghanistan.
Wilders and his Freedom Party gained 10 seats to come third behind the Liberals and Labour with 21, reflecting concern in the country about immigration and foreign policy.
"More security, less crime, less immigration, less Islam -- that is what the Netherlands has chosen," Wilders said.
The Liberals are calling for the steepest spending cuts of up to 39 billion euros ($52 billion) over the next decade but may have to compromise if they are to form a coalition.
"The Netherlands can emerge stronger from the crisis by taking measures now," Rutte, a 43-year-old former human resources manager who once worked at Anglo-Dutch consumer goods giant Unilever, told reporters.
Labour, led by former Amsterdam mayor Job Cohen, could conceivably join the Liberals in a coalition but as the second-biggest election winner it is likely to want concessions.
"Although circumstances are difficult, we again will take our responsibility to make sure our country continues down the social road," said Cohen.
Marcel Boogers, political science professor at Tilburg University, said a right-left combination -- sometimes described as a "purple coalition" -- was a possible outcome.
"That might be a viable coalition," Boogers said.
Although the euro zone's fifth-largest economy enjoys one of the highest debt ratings in the currency bloc, borrowing costs have edged higher over its ability to pay back loans.
Investor jitters and a flight to more secure debt have increased the spread between Dutch bonds and their German benchmarks to 40 basis points, up from 15 to 20 a week ago and just 7 points in March.
Casting aside decades of stern fiscal policies, the government took over the country's biggest bank ABN AMRO in 2008 after its buyer Fortis collapsed, spending more than 26 billion euros to prop it up.
It spent more later to boost the economy, offer tax relief and support other financial groups, heightening investor concern over its finances.