Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

No strategy and a beige suit

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014

Read more

ENCORE!

Alain Choquette: A Hilarious Magician in Paris

Read more

FOCUS

France welcomes Iraqi Christian refugees

Read more

FRANCE IN FOCUS

Emmanuel Macron: A new economy minister with a pro-business agenda

Read more

THE OBSERVERS

More of this year's best Observers stories

Read more

#TECH 24

Changing the world, one video game at a time

Read more

IN THE PAPERS

Socialist Party summer conference kicks off in explosive atmosphere

Read more

  • Exclusive: Fabius warns of further sanctions against Russia

    Read more

  • Experimental Ebola drug ‘ZMapp’ heals all monkeys in study

    Read more

  • IMF stands behind Lagarde amid French corruption probe

    Read more

  • Ukraine to relaunch NATO membership bid

    Read more

  • Suriname leader’s son pleads guilty to courting Hezbollah

    Read more

  • British killer escapes from French psychiatric hospital

    Read more

  • Chelsea’s Torres set for AC Milan switch

    Read more

  • Police hunt for British boy with brain tumour taken to France

    Read more

  • France shines in IMF list of world’s promising economists

    Read more

  • Mapping Ukraine: Canada and Russia in ‘tweet for tat’ row

    Read more

  • First case of Ebola confirmed in Senegal

    Read more

  • Obama has 'no strategy yet' on potential Syria strikes

    Read more

  • Netflix to woo French with ‘House of Cards’ set in Marseille

    Read more

  • French businesses ‘hoping for a new Thatcher’

    Read more

  • Syrian refugees surpass 3 million, UN says

    Read more

  • West backs Ukrainian claims of Russian incursion

    Read more

  • Libyan PM resigns as Islamists set up rival administration

    Read more

  • UN says 43 peacekeepers captured in Golan Heights

    Read more

  • The deleted tweets of Manuel Valls

    Read more

  • Peru seizes record 6.5 tonnes of Europe-bound cocaine

    Read more

Europe

Dutch government on verge of collapse over budget cut row

Text by News Wires

Latest update : 2012-04-23

The Dutch government was on the brink of collapse on Monday after Prime Minister Mark Rutte’s (photo) minority coalition failed to reach agreement with the anti-EU Freedom Party on shaving more than €14bn from the budget.

REUTERS - The Dutch government teetered on the verge of collapse on Monday in a crisis over budget cuts, spelling the likely end of a coalition which has strongly backed a European Union fiscal treaty and lectured Greece on getting its finances in order.

The row erupted at the weekend when the anti-EU Freedom Party refused to agree with the centre-right coalition on how to cut 14 to 16 billion euros from the budget and get the Dutch deficit down to the EU target. New elections are now a near certainty.

“I assume it is inevitable,” deputy foreign minister Ben Knapen told Dutch news programme RTL Z. “It is important that everyone who bears responsibility stays calms and makes sure we get an orderly budget. We do have big problems,” Knapen said before he entered a cabinet meeting.

Prime Minister Mark Rutte’s minority cabinet, which relies on the populist Freedom Party to get legislation through parliament, met to discuss whether it had any hope of pushing through the budget cuts - and whether to offer its resignation. New elections could be announced as early as Monday, and would most likely be held in September or October, analysts said.

Rutte and Finance Minister Jan Kees de Jager - who flew back from IMF talks in Washington when the crisis broke - have been among the euro zone’s harshest critics of “budget sinners” such as Greece and Portugal.

The Netherlands has been close to Germany in calling for tough austerity measures across the euro zone, and in supporting the EU’s fiscal pact which must win parliamentary ratification by the end of the year in the 25 countries whose governments signed up to the treaty.

The prospect of new elections pushed up borrowing costs for the Netherlands, traditionally one of the strongest euro zone economies, as the country was drawn into Europe’s debt crisis.

Rutte, whose coalition has been in power since October 2010, failed to agree the cuts with Freedom Party leader Geert Wilders after seven weeks of talks on the same weekend that the far right performed strongly in French elections.

French jolt

Anti-immigration crusader Marine Le Pen jolted the French establishment on Sunday by winning 18 percent of the vote in the first round of the presidential election, the best result for a candidate of the National Front.

The Dutch crisis also flared at a time of wobbling support for the EU fiscal pact.

The Socialist frontrunner to win the French runoff next month, Francois Hollande, has promised to renegotiate the compact. This has alarmed financial markets, which fear he could throw the EU’s commitment to fiscal discipline into question, although his aides insist he will not try to pick the treaty apart.

France has already lost its triple-A credit rating and the Netherlands may follow suit if it fails to make the budget cuts.

“Our competitiveness, credibility and triple-A status are at risk because Wilders has walked away. That is very costly. The interest rate on our state bonds can run up,” former Dutch minister and current European Commissioner Neelie Kroes was quoted as saying in Dutch daily De Telegraaf.

The cost of insuring Dutch debt against default rose to its highest since January as the country slipped into crisis. Dutch five-year credit default swaps rose 9 basis points to 128 bps after the failure to agree on the budget with Wilders, whose party is outside the coalition.

“This represents a potential sizeable stumbling block to the already challenged fiscal compact,” Rabobank said in a research note. “A failure on the part of a core country (and one we judge as ‘true core’ at that) to adhere to compact’s deficit limits will represent a powerful debasement of the treaty.”

The crisis would make it harder for Germany and other core members to sell the idea to voters that “bailouts are not a free lunch - they come with a policy straitjacket”, it added.

Date created : 2012-04-23

  • ITALY

    Italy to miss pledge to balance budget by 2013

    Read more

  • EUROZONE

    Eurozone boosts debt firewall to €800 billion

    Read more

  • EUROZONE

    Eurozone unemployment rate hits all-time high

    Read more

COMMENT(S)