AFTER spending seven weeks in a fruitless search for a solution to an austerity puzzle worth around €14 billion ($18 billion), the Dutch government has crumbled. Mark Rutte, the prime minister, submitted his resignation to the Queen on April 23rd. Elections could be held as early as June, although an autumn date appears more likely. This followed the breakdown, at the weekend, of budget negotiations between the government, comprising Mr Rutte's liberal VVD party and the centre-right Christian Democrats (CDA), and the populist Freedom Party, led by Geert Wilders. After the last election, in 2010, Mr Wilders, best known for his anti-Islam rhetoric, had pledged to prop up the government from the backbenches, giving it a parliamentary majority of one, in exchange for policy concessions. That arrangement is now over. The government had been given a deadline of April 30th by the European Commission to produce a budget that would cut the fiscal deficit from 4.6% of GDP to 3% in a year. According to leaked documents the savings were to be made by increasing value-added tax, cutting healthcare and development aid, and trimming some of the generous state subsidies for house purchases. The burden of the cuts would have fallen mainly on lower- and middle-income people.

That package was unacceptable “in its entirety”, said Mr Wilders to the television cameras this weekend. He accused the government of “budget-cutting the Netherlands into the ground” and of following Brussels's diktat. The EU's 3% rule, he added, was “not sacred”. Speaking for the government Maxim Verhagen, the deputy prime minister, accused Mr Wilders of “letting 16 million people down”.

What is now a caretaker government will struggle to pass a budget before next week's deadline. Mr Rutte, whose hardline approach to fiscal management has irritated several of the more profligate EU countries, now faces the embarrassing prospect of being unable to follow the rules he has prescribed so full-throatedly for others.

Markets are beginning to murmur. Yields on Dutch debt rose today, and the AEX equity index fell slightly. The European Commission has warned the Dutch that political crisis is no excuse for not following rules they had a hand in devising back in 1997. The Dutch economy is already in recession, and many fear the country could follow France in losing its AAA credit rating.



To have any chance of passing its budget in time the government will have to seek support from the parliamentary opposition, mainly the centre-left Labour Party. That party was formally sidelined during the budget negotiations, but in recent weeks CDA and Labour insiders have let it be known that they have been mending bridges.

It is unclear whether this will help Jan Kees de Jager, the finance minister and a CDA man, find the support he needs. But he is going to try. Tomorrow he is likely to come up with fresh budgetary proposals for parliament.



As for the elections, the polling looks like good news for the opposition. The once-marginal Socialist Party, which stands to Labour's left and which shares with Mr Wilders an aversion to EU-inspired austerity, would win 30 of the 150 seats in parliament. Labour would take 24. For now, at least, it is difficult to imagine a stable government without at least one of the two left-wing parties. Labour's new leader, Diederik Samsom, has already said he would join a VVD-led coalition.

Mr Rutte's VVD is still polling well, with its support implying a rise from 31 seats to 33. But the centre-right CDA, damaged by years of internal strife, is down to a historic low of 11 seats. Mr Wilders, too, has lost some of his shine, dropping from 25 to 19 seats. His move this weekend may have been prompted more by desperation than by calculation.