On October 29th, the centre-right Liberals (VVD) and the centre-left Labour Party (PvdA) announced that they had agreed to form a 'grand coalition' government. The new ministerial line-up is expected to be presented to the Queen next week. The speed at which the two former adversaries agreed on a coalition, as well as the multitude of compromises that they made, bodes well for political stability. A coalition agreement under the slogan 'Building Bridges' has been presented, focusing on further budget savings to the tune of €16bn, thus continuing the fiscal consolidation course adopted by the previous government (a minority coalition led by the VVD).
'Building Bridges' towards stronger political stability
The government formation agreement comes less than seven weeks after the snap general election on September 12th. If the cabinet is formally accepted next week, this would be one of the fastest government formation processes in recent Dutch history; since 1977 it has taken on average 86 days for each of 13 cabinets to be formed. The pace at which party leaders Mark Rutte (VVD) and Diederik Samsom (PvdA) have found compromise on major divisive issues indicates that they wanted to send a message of political unity and decisiveness after ten years of political instability (with five elections) since 2002. Until recently, the Dutch political landscape had been at a risk of fragmentation, with the political centre squeezed by populist right-wing and left-wing forces. The unstable minority government that preceded the new VVD-PvdA coalition highlighted the risk of increasingly ineffective government in the Netherlands. The 2012 election, however, marked a victory for the political centre, perhaps indicating the electorate's wish for more stability.
Majority in Second Chamber, but not in First Chamber
The VVD-PvdA coalition is supported in the 150-seat Second Chamber (the lower house) by a combined 79 members of parliament (MPs). However, the new government lacks a majority in the less powerful 75-seat First Chamber (where it has a combined 30 MPs), which mainly has a revising role in relation to draft legislation and is elected by representatives of the Netherlands' 12 provincial parliaments. The First Chamber still reflects the political preferences of 2011, when the right-wing parties held a larger share of the vote. Without a government majority in both houses, new laws and policies have a slightly lower chance of being accepted.
Policy programme focuses on ongoing fiscal consolidation
The new government's policy agenda is centred on further fiscal consolidation to bring the country's public finances in order (public debt has risen above 70% of GDP from below 50% in 2007). To that effect, the package includes a mixture of revenue-raising measures and public-spending cuts aimed at net budget savings of €16bn (US$21bn) by 2017; the measures are worth €23bn overall, but new spending of around €7bn reduces the net effect. The bulk of savings will be made through reductions in healthcare and social security spending. The policy programme entails many compromises. Perhaps most important is the VVD's agreement to a gradual reduction in mortgage tax relief, while the PvdA agreed to cut the top marginal tax rate.
Continuity also on immigration and Europe
During the election campaign, both the VVD and PvdA had to adopt a slightly tougher line than previously on immigration and Europe in order to fend off their respective challengers from the far right (the Party for Freedom, PVV) and far left (the Socialist Party, SP) of the political spectrum. The strong presence of these two challengers in parliament (even though both underperformed at the September election) means that the new government will maintain the previous government's tough line on immigration and integration. Among other things, the new coalition plans to extend the residency period before immigrants can become Dutch citizens from five to seven years. Immigrants will not be allowed to claim welfare benefits for seven years after arriving, and proficiency in the Dutch language will become a condition for receiving basic welfare payments.
On Europe, the continuing focus on fiscal consolidation domestically means that the Netherlands is likely to remain a key ally of Germany in prioritising fiscal austerity in the highly indebted peripheral eurozone countries as a precondition for further financial support. The coalition agreement also stresses the Netherlands' support for the gradual establishment of a European banking union. Moreover, although the ministerial line-up has not been officially confirmed, the traditionally pro-EU PvdA is set to obtain the key portfolios in the new cabinet (to be led by Mr Rutte as prime minister) that deal with the euro zone crisis, namely foreign affairs (Frans Timmermans) and finance (Jeroen Dijsselbloem). In particular, the replacement of the outgoing finance minister, Jan Kees de Jager (Christian Democratic Appeal, CDA), who has been opposed to debt mutualisation and stronger federal fiscal competence in the eurozone, may mark a shift in rhetoric (although probably less in policy) under the new government.
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