New Dutch government under Mark Rutte wants to spend more

Mark Rutte leaves building

Mark Rutte of VVD party leaves the Logement after a conversation with informateurs Johan Remkes and Wouter Koolmees and the chairmen and deputies of the groups VVD, D66, CDA and ChristenUnie parties in which the latest adjustments to the coalition agreement have been discussed in the Hague, the Netherlands, 15 December 2021. [Bart Maat (EPA/EFE)]

The coalition agreement of the new Dutch government under Prime Minister Mark Rutte foresees more spending on childcare, teacher salaries, and environmental issues, showing the increased influence of the centre-left, liberal party D66.

Although the coalition agreement remains cautious on EU fiscal rules, the additional spending at home marks a shift away from the frugal image of the Dutch government.

In the summer of 2020, the previous Rutte government was one of the staunchest opponents of the EU’s recovery fund, calling instead for fiscal restraint.

Stronger D66 leads to more spending

However, that government resigned over a child welfare fraud scandal in January 2021, leading to elections in March 2021. The elections were won by Rutte’s centre-right, liberal VVD party, but also saw a strong increase in parliamentary seats for the D66, which is the second-strongest party in the new coalition.

“In general, D66, which is clearly pro-European and also more in favour of public spending than Rutte’s VVD, seems to have been successful in leaving its mark in the coalition agreement”, said Theresa Kuhn, associate professor in political science at the University of Amsterdam.

The coalition agreement includes increased spending plans in housing, child care, green transition and education. For example, €60 billion are made available to fund the green transition and to deal with high nitrogen emissions.

“This is clearly a change to the previous government”, Kuhn told EURACTIV.

According to her, however, this does not mean that the Dutch government will change its position on frugality in the EU.

Unclear position on EU fiscal rules

The coalition agreement remains open on the reform of the macroeconomic governance framework, which was launched in October and is expected to be intensely discussed over the course of 2022.

“We are committed to a sound and prudent macro-economic policy and necessary reforms by member states, aimed at sustainable debt, higher economic growth and upward convergence”, the coalition agreement states.

It goes on to state that the coalition would have a constructive approach to a possible modernisation of fiscal rules when it is aimed at debt sustainability and upward economic convergence. Moreover, it demands effective enforcement.

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The European Commission on Tuesday (19 October) took another step towards reforming the EU’s much-discussed fiscal rules, including the bloc’s strict debt and deficit limits enshrined in the Stability and Growth Pact.

While some analysts note that there are no red lines for fiscal reforms in the EU, Kuhn remained more cautious.

“I would be careful to expect an end of Dutch position on frugality in the EU,” she argued in light of the focus on prudence and on the reforms that member states should do according to the agreement.

Who becomes finance minister?

While the coalition agreement has been published, it is not yet clear who will sit in the cabinet.

According to Kuhn, a lot will depend on who will lead the finance ministry. If the fiscal hawk Wopke Hoekstra takes over the finance ministry as before, the position on EU fiscal matters should not be expected to change much, she argued.

However, Hoekstra’s position in the finance ministry is not assured. His party lost seats in the last election and he was implicated in the Panama Papers scandal earlier this year.

The new Dutch government will be the fourth government coalition under Rutte, who has been prime minister or caretaker prime minister of the Netherlands since 2010, which makes him the longest-serving head of government in the EU.

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Although he is known to be a hardline opponent of public debt, the new German finance minister showed his openness to compromise during his first trip to Paris only days after taking office.

[Edited by Zoran Radosavljevic]

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