Dutch government collapses as top-level budget cuts talks fail: Prime Minister quits after failure to bring down national debt



Quit: Dutch Prime Minister Mark Rutte resigned today

The Dutch government today collapsed when the prime minister resigned after top-level talks on an austerity package failed.

The government information service announced Queen Beatrix had accepted the resignation of Prime Minister Mark Rutte and his Cabinet after a meeting in which Rutte told her the talks had failed over the weekend.



Rutte is to address parliament tomorrow to discuss interim measures to keep public finances in order and schedule new elections.



No date for elections was immediately announced, but opposition lawmakers called for a vote as soon as possible.



The Dutch government collapse came a day after the first round election victory of France's soft-on-austerity socialist candidate Francois Hollande.



It calls into question whether austerity policies that are causing trauma in countries such as Greece, Spain and Portugal can be enforced even in 'core' European countries such as France - or the Netherlands, one of the few along with Germany to maintain an AAA credit rating.



Rutte's hopes to clinch a deal to cut the target below the EU's 3 per cent target evaporated on Saturday, when his most important political ally, populist euroskeptic Geert Wilders walked out of the talks, saying a slavish adherence to European rules was foolish and would harm the Dutch economy.



That view is shared by some, such as the government's own Central Plan Bureau, and opposed by others, such as Dutch Central Bank President Klaas Knot.



'We don't want our pensioners to suffer for the sake of the dictators in Brussels,' Wilders said.

Changes: Geert Wilders' (left) party walked out of the coalition, leading to Rutte quitting as PM following his meeting with Dutch Queen Beatrix (right) today



European Commissioner Neelie Kroes called Wilders a hypocrite, since the Netherlands itself, along with Germany, had been one of the loudest in demanding Brussels adopt 3 per cent deficit limit in the first place.



'Pointing to Brussels now is dumb, it's untrue, it's distracting, and it doesn't solve anything,' said Kroes, who is a member of Rutte's free-market VVD party.



EUROZONE COUNTRIES STILL FACE UPHILL STRUGGLE ON DEBT

The 17 countries using the euro still face an uphill struggle to get a handle on their debt, new data reveals.

In spite of managing to slash government deficits to 4.1 per cent of economic output in 2011, the overall debt rose from 85.3 per cent of GDP to 87.2 per cent.

The Eurostat figures underline how difficult it will be for the eurozone to bring its deficits and debts back below the EU-stipulated limits of a deficit of 3 per cent and debt of 60 per cent of GDP.

Ireland's deficit of 13.1 per cent of GDP was by far the highest as the bailed-out country continued to spend billions of euros bailing out its struggling banks.

Greece's deficit of 9.1 per cent of GDP was not much better than Ireland's, and Athens has already started injecting billions of euros into its own banks which are reeling from a restructuring of the country's government debts.

Across the 27-country EU, which also include non-euro nations like the U.K., the average 2011 deficit was 4.5 per cent of GDP, down from 6.5 per cent in 2010.

A spokesman for the German finance ministry said that despite developments over the weekend, approval for Europe's plan to tackle government debt by cutting spending is actually 'increasing.' He didn't give evidence backing that assertion.



'We should not now simply let ourselves be thrown off track by daily developments,' Martin Kotthaus told reporters in Berlin.



He said Europe's recent reforms had been well-received at a weekend meeting of the International Monetary Fund. 'The road is right; Europe has done its homework,' he said.

Finance Minister Jan Kees de Jager insisted he still plans to submit an outline budget to Brussels by April 30, as mandated by European rules.



He said he was optimistic about prospects for agreeing some cuts with opposition parties in Parliament.



'We'll show the financial markets, in consultation with Parliament, that the Netherlands' decades-long budgetary discipline will remain,' he told reporters after a brief Cabinet meeting ahead of the resignation.



Opposition lawmakers say they are prepared to work with Rutte to draw up a 2013 budget.



However, Diederik Samsom, leader of the opposition Labor Party, signaled he would not insist on bringing the Dutch deficit back in line with EU norms next year.



'As far as we are concerned, you don't have to reach 3 per cent by 2013,' he said.



Although the Netherlands has relatively low levels of national debt, its economy is in recession and it is expected to post a deficit of 4.6 per cent in 2012.



The package Rutte had been negotiating with Wilders would have slashed foreign aid and hastened a planned increase in the retirement age to 66 from 65.

Warning: The 17 countries using the euro still face an uphill struggle to get a handle on their debt, new data reveals

Wilders, who is publishing a book in the U.S. next week about his struggle against Islam, said abruptly Saturday he could not support the package because it was unfriendly to the elderly.



Yields on Dutch bonds were up 0.11 of a per cent higher than they were before the weekend. Netherlands government bonds are trading around 2.35 per cent for 10-year debt, about 0.6 percentage points more than Germany.



Ratings agency Fitch last week warned the Netherlands stands to lose its AAA credit rating depending on the outcome of the budget talks that failed Saturday.

