Rutte performs U-turn on Dutch austerity promises

UNDER GROWING pressure in the polls, Holland’s caretaker prime minister, Mark Rutte, has admitted that some of the key measures in a €13 billion austerity package prepared for Brussels in the last days of April will be abandoned if his Liberal party (VVD) is returned to power in September.

In an extraordinary U-turn, which is likely to raise eyebrows in both Berlin and Brussels, Rutte reassured his party faithful at a weekend conference in The Hague that some of the electorally most unpopular elements of the deal would never even find their way into the VVD election manifesto.

In retrospect, he said, the programme of cuts had been “a compromise” – which he and his senior negotiators had had no option in the circumstances but to support. “We did what had to be done – at the time,” he said.

The aim of the cuts – which include a pay freeze for civil servants, teachers and police, more expensive healthcare and abolition of a tax allowance for commuters – was to bring the Netherlands’ budget deficit below the euro zone limit of 3 per cent of GDP next year.

The minority Liberal-Christian Democrat coalition collapsed in April when right-wing Freedom Party (PVV) leader Geert Wilders, who had supported the government from the opposition benches since 2010, rejected the cuts as weighted against the less well-off and refused to support them.

The deal was salvaged when a five-party coalition comprising the two government parties, GreenLeft, centre-left D66 and Christian Unity, ensured it met the April 30th deadline for delivery to Brussels – where it was welcomed enthusiastically by monetary affairs commissioner Olli Rehn.

At the time, the government’s success in apparently putting together the package against such odds was hailed by Rutte and his finance minister, Jan Kees de Jager, a particular critic of Greece, as an indication that some euro zone countries were capable of living with fiscal discipline.

However, as the full impact and depth of the cuts has emerged, supporters of the five pro-austerity parties have watched their popularity decline, while support for Emile Roemer and the anti-austerity Socialists – and to a lesser extent Labour – has hit an all-time high.

At the opposite end of the political spectrum, Wilders and the PVV have also benefited.

Polls as recently as yesterday continue to suggest that for the Liberals the price of doing the right thing by the badly battered euro zone may be to lose their grip on power – unless they can rapidly distance themselves from their own austerity programme.

So at the weekend Rutte attempted to do just that, promising some of the toughest measures would be thrown out after the election if the Liberals were returned.

“The measures that were agreed by the five parties to get the budget back under control would hit the hard-working Dutchman, the backbone of our society,” he said.

“If the VVD is given a say in the next government, we will replace a number of those measures – and you will soon see the evidence of that in our election manifesto.

“What we agreed was a compromise. We did not take the easy way out; the VVD never does. We did what had to be done – at the time.”

Displaying again a rift that has opened up with German chancellor Angela Merkel in recent weeks, Rutte added that what was best now for the Netherlands was not “more Europe” or closer political union but a Europe with rules aimed at protecting common economic interests.

The immediate problem for Rutte is that if the Liberals are indeed returned as part of a new coalition government under the terms he set out yesterday the austerity package will have to be renegotiated again – a process that would take several months and have no guarantee of success.

In the meantime, a stalled economy, falling house prices and battered consumer confidence mean an open field for left-wing parties. Now leading in the polls, the Socialist Party, which was founded in 1971 as a Maoist party named the Communist Party of the Netherlands/Marxist-Leninist, is opposed to privatising public services, with its ideological emphasis on employment, social services, healthcare and education – all areas currently under threat from austerity.

If its current popularity is reflected at the polls, it’s likely to form a coalition with the Labour Party, which also rejects the five-party cuts package. More centrist and less “revolutionary” in origin than the Socialists, the two parties now share the broad social democratic middle ground – and Labour leader Diederik Samsom has indicated he believes an alliance could work.

In one of the few light moments at the Liberals’ weekend conference, Rutte recounted how he sometimes awoke at night perspiring. He had been dreaming, he joked, that the Socialists had come to power and believed they had discovered a machine that made free money. The free money is unlikely but the rest may yet turn out to be more than a bad dream.