Fiscal treaty splits Dutch parties ahead of election

Emile Roemer 300 x 200.jpg

The euro's new fiscal pact has become a political football in the Netherlands ahead of September elections, with Finance Minister Jan Kees de Jager dismissing opposition suggestions it should reject the treaty.

Socialist leader Emile Roemer, who some polls show on course to become the next prime minister, said Friday (17 August) the Netherlands would refuse to pay a penalty to the European Union if its budget deficit exceeded 3% of GDP, breaking EU rules.

His party also signalled it would demand a referendum on the compact, a core element in Europe's attempts to fix its debt crisis.

De Jager – whose  Christian Democrat party ruled in coalition with the Liberals until the government's collapse in April – on Friday reiterated the Netherlands' commitment to the EU's 3% budget deficit rule.

He said some investors had called the ministry to seek clarity on Roemer's comments and that he and other officials were working to reassure them that the Netherlands would meet its obligations under European guidelines no matter what party was in charge.

"We wanted these rules ourselves. You have to stick to international agreements. Therefore we need stricter rules to prevent a debt crisis as seen in the past years. A different opinion is counter-productive," De Jager said.

The Dutch deficit is expected to be 4.2% of GDP in 2012, but the government has promised it will fall to 2.9%, below the EU target, by a deadline of 2013.

"The government has to get things working again. And then I have to pay a ridiculous penalty if the deficit is larger than 3%? Over my dead body," Roemer was quoted as saying in Dutch financial newspaper Het Financieele Dagblad.

"The Netherlands is one of the biggest net payers [to the EU]. Spain also gets more time. That should apply to everyone. We have to do what is wise," Roemer said.

The Liberal-Christian Democrat government collapsed in April when its chief ally, the populist Freedom Party, refused to back big budget cuts aimed at meeting the EU's deficit targets.

Within days of the government crisis, De Jager pulled off a budget deal with the support of three opposition parties.

The finance minister also reiterated in Friday that the focus of the Netherlands and the eurozone was to keep the single currency area together.

"We never speculate about an exit from, or the break-up of the eurozone. The eurozone is very important for the Netherlands. We've benefited a lot from Europe and the single market," De Jager told reporters.

Prime Minister Mark Rutte's centre-right coalition government collapsed in April over proposed budget cuts.

The controversy centred around the proposed 1.6% of GDP deficit reduction mandated by EU rules, which would likely entail substantial cuts to health and pension spending.

In recession since July 2011, the Netherlands has since become one among the eurozone’s worst performers, expected to shrink 0.9% this year, while triple-A peers Germany, Finland and Luxembourg are seen growing moderately.

The snap election will be held on 12 September.

  • 12 Sept.: National elections in The Netherlands

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