Dutch public shrugs as coalition government finally thrashed out

After taking what is now the longest period since the second World War to form a government, the Netherlands is on the verge of a new four-party coalition which will see Liberal leader Mark Rutte returned as prime minister for a third consecutive term – and the public largely indifferent.

That indifference is a positive indicator. Positive because it's based on the fact that the economy has been thriving, growing at its fastest rate in a decade, faster than much larger economies such as Germany, France, Italy and Spain, despite the country having a caretaker cabinet.

Positive too because it's given political leaders the space they needed, since the March 15th election, to stress-test various coalition options while still excluding the country's second-most popular force, the far-right Freedom Party, and its anti-EU, anti-Islam, anti-refugee leader, Geert Wilders.

The talks were made more challenging too by the fact that Labour, the outgoing junior coalition partners – beaten down by the electorate from 38 seats to just nine – opted for “a period of reflection” on the backbenches, even more severely limiting the negotiators’ options.

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Had the economy still been in recovery, Rutte would have been under far more pressure to do a deal. And Wilders, uncharacteristically quiet for the past 200-plus days, would have had far more ammunition to argue the injustice of his exclusion, which has, in fairness, provoked some disquiet.

Instead, there’s been a steady economic recovery since the last quarter of 2016. Unemployment stands at 4.7 per cent and falling. Growth this year will reach 3.3 per cent, the first time it’s seen 3 per cent since 2007. Inflation is at 1.3 per cent. And there’s a budget surplus of 0.8 per cent of GDP.

‘Healthy treasure chest’

It was enough to allow King Willem-Alexander to observe on budget day last month: “After some difficult years, we have a thriving economy and a healthy treasure chest.”

"Yes, there are things that could be improved but they're not urgent," says Marieke Blom, chief economist at the ING banking group. "So does it matter that we have a caretaker government? No, to be honest, it doesn't."

That economic leeway has been crucial to the success of the talks, which should see a draft programme for government unveiled by the Liberals, the Christian Democrats, centre-left D66, and the ultra-conservative Protestant party, Christian Union, on Tuesday – with a new cabinet named and in place by the month's end.

On paper, the greatest obstacle to these four parties forming a government should have been the chasm between D66 and Christian Union on “ethical issues” such as euthanasia and human embryo research. The compromise here will be to commission more research, but there’ll be no new legislation that could divide them over the next four years.

The most immediate and potentially corrosive row facing the new government is industrial action by primary teachers, who have demanded €900 million in salary increases and another €500 million to increase teacher numbers. The aim is to defuse that with a package worth €770 million.

On taxation, the number of tax bands will be cut from four to two from 2019. There’ll be cuts totalling €5 billion, with middle- and high-earners benefiting most. However, the rate at which mortgage interest can be deducted from tax is to be reduced. And the lower VAT rate rises from 6 to 9 per cent.

Health insurance

Despite warnings to the contrary, it’s expected there’ll be no increase in the annual own-risk health insurance deductible of €385, one of the most bitterly argued issues of the election campaign. A system of road pricing is to be introduced for freight traffic, and energy taxes will go up.

Another fraught election issue was refugees, and policy here is to get tougher. Even refugees with residence permits will no longer be able to claim welfare, including help with rent or health insurance, for two years after arriving.

The contents of the draft programme for government have been well leaked, including the division of the 16 ministerial jobs: six for the Liberals, four each for the Christian Democrats and D66, and two for Christian Union.

The final battle, apparently, is over who will get the powerful job of minister for finance, a member of the Christian Democrats or a member of D66. That’s a standoff with an undeniable ring of truth about it.