Netherlands

On 23rd April, the Dutch government collapsed after it failed to agree a new austerity package, with Prime Minister Mark Rutte resigning. Rutte had been attempting to secure a deal with his coalition in order to reduce the country’s budget deficit to 3% of the GDP, in line with EU rules. Although the Netherlands has a low level of debt, and is one of the few EU countries to maintain an AAA credit rating, its economy is back in recession and it budget deficit is currently around 4.6% of the GDP.

But talks were abandoned when eurosceptic Geert Wilders and his populist PVV party, a coalition partner of Rutte’s conservative-liberal VVD, walked out, claiming that “a slavish adherence to European rules was foolish and would harm the Dutch economy.” Thus the coalition government fell. European Commissioner Neelie Kroes, who is a VVD member, described Wilders as hypocritical, as the Netherlands had been one of the countries most vociferously advocating a 3% deficit limit. She said, “ Pointing to Brussels now is dumb, it’s untrue, it’s distracting and it doesn’t solve anything.” [1]

Just four days later, Romania’s government also collapsed, when Prime Minister Razvan Ungureanu lost a no-confidence vote after just 2 months in office, amid public protests at severe spending cuts. Neil Shearing, chief emerging markets economist at Capital Economics, said that while the fall of Ungureanu’s government raised wider concerns, it should be noted that Romania has a history of fragile governments, and therefore comparisons with the situation in Holland should be made with caution.  [2]

But as two countries find themselves in political and economic turmoil, the message is clear: people are beginning to tire of austerity. The fall of these two governments, along with France electing the “soft-on-austerity” François Hollande, would seem to suggest that Europe will soon see a collision between those who believe austerity to be the answer, and those who don’t.

Image source: European Commission