RaboResearch - Economic Research

Will it be Wilders? And eight other questions about a new Dutch government

Economic Report

  • On average forming a government takes 74 days in the Netherlands
  • The country is approaching day 90
  • We think that a stable government is viable

The Brits have elected a ‘hung parliament’. Although this is an unusual situation, PM Theresa May wasted no time in proposing a minority government. Indeed, the UK might have a new government before the Dutch do, even though they went to the polls three months ago! PM Mark Rutte’s Liberal Party (VVD) saw off a challenge from Geert Wilders’ populist Freedom Party (PVV), but hasn’t been able to form a new government. Why is it taking so long? Will Wilders get a chance to govern? Are new elections possible? We believe the most likely outcome is a middle-of-the-road majority government, although a minority government is certainly possible. New elections or a coalition including Geert Wilders are not probable. 

Why isn’t there a new government yet?

Figure 1: Never enough
Figure 1: Never enoughSource: Dutch Electoral Council

Contrary to the United Kingdom, where a ‘hung parliament’ is actually rare, in Dutch politics election ‘winners’ never have an absolute majority in the lower house (see figure 1). Much like after the snap June elections in the UK: the largest party has to find support from the other parties. Sometimes that even means going into business with fierce election rivals or idealistic opponents. Hammering out a deal therefore takes time. After the 1977 elections it took a whopping 208 days before a political deal was finally brokered. On average forming a new government takes 74 days though, and we’ve almost reached 90 days. This is not surprising: the current political landscape in the Netherlands is even more fractured than usual, with the Liberal Party (VVD) of current prime minister Mark Rutte having claimed victory in the March lower house elections with just 33 out of the 150 seats, less than half what’s needed for a majority.

What’s the hold-up this time?

This is a numbers game really: thirteen parties were elected to parliament and six different parties received between 9 and 22 percent of the vote. After the elections analysts were quick to point out a potential partnership between VVD, Christian Democrats (CDA) and Liberal Democrats (D66). The parties have a long history of working together, and think alike on many socio-economic issues. No wonder the media dubbed them the ‘engine block’ of a future coalition. Between them, however, the three parties do not have a majority. They’re at least one party short.

There are not a lot of viable candidates left in the political dating pool for VVD, CDA and D66, however. Most other parties either do not have enough seats to help the engine block to a majority or have such fundamentally different plans for Dutch society and the economy that becoming a junior partner in a coalition with the other three hardly seems realistic.

The case of Geert Wilders’ Freedom Party (PVV) is different altogether: his party is currently the second largest party in lower house, but most other parties have ruled out working together with him following his sharp anti-Islam and anti-immigrant rhetoric. Wilders furthermore has a reputation as an unreliable governing partner after he unexpectedly withdrew his support in 2012 for the then-minority government of VVD and CDA. 

What’s the hurry?

For the first time since 2008 the state has a budget surplus, and with an outgoing cabinet only minding the store, 2017 will likely be a surplus year as well. Meanwhile we expect the economy to grow 2.2 percent this year and 1.9 percent next year. So what’s the rush? Admittedly, the need for a new cabinet seems less urgent than just a few years ago when the Netherlands, much like the rest of the Eurozone, was still in an economic downturn. But we feel that despite the economic outlook being more positive, there are still some large obstacles to be tackled by the Netherlands. RaboResearch has estimated that structural economic growth in the Netherlands is a meager 1.2 percent. If we wish to improve our trend growth, policy changes are necessary. And for that, the country needs a new cabinet.

What’s up with the Greens?

Soon after the elections, the VVD, CDA and D66 started negotiations with the Greens (GroenLinks). But in May, the four parties announced that they had broken off negotiations to form a new governing coalition. They told the press that migration is what drove a wedge between them, but this certainly isn’t the only major issue. When it comes to, for example, socio-economic issues, GroenLinks takes a decidedly different stance. It wants to reduce income inequality, whereas the other parties are quick to point out that the Netherlands is already one of the world’s most egalitarian countries.

Interestingly, the four parties are now back at the negotiation table, after their initial impasse and after D66 front man Alexander Pechtold gave CU the cold shoulder twice in the past month (see next question). Success for a coalition with the Greens is not certain though, as their political ideas are still quite far apart.

What about the Christian Union?

The Christian Union (CU), one of the smaller parties, is a bit closer to the ‘engine block’ than GroenLinks on a variety of important topics (see table 1). But a coalition consisting of VVD, CDA , D66 and CU would have just the bare minimum seats required to have a majority in both lower and upper house of Dutch parliament. In previous years MPs have occasionally split off from their parties, retaining their seat (which is allowed). A coalition with a majority of just one seat is therefore a risky bet as one disgruntled MP could effectively hold the entire coalition hostage.

Table 1: Who agrees with whom?
Table 1: Who agrees with whom?Note: figure shows voting agreement between parties on parliamentary motions for 2010-2017 period
Source: tweedekamer.nl

What’s more: with CU on board, half of the coalition parties would be religiously inspired. This isn’t ideal for VVD and D66. Both parties, especially D66, are generally more liberal when it comes to issues like euthanasia. D66 leader Alexander Pechtold has held off negotiations with CU for that reason. It therefore remains to be seen if those four parties will end up at the negotiation table, and will be able to broker a deal.

What we can say with more certainty is that is seems inevitable that the current formation process is going to take significantly longer than five years ago, after the previous lower house elections. Then it took VVD and Labour Party (PvdA) less than two months to form a new coalition.

What about a minority cabinet?

If VVD, CDA and D66 do not manage to form a coalition with either GroenLinks or ChristenUnie, a minority coalition of the former three or some other constellation could be on the table. The opposition would then support legislative proposals by the minority coalition in an on the go and à la carte manner. Minority governments are rare, though, in Dutch parliamentary history. In 2010 VVD and CDA formed the first such government in over thirty years, for which Geert Wilders’ PVV provided parliamentary support. Their cooperation broke down in 2012 when additional austerity measures had to be negotiated and no agreement could be reached.

This time around, the political leaders of the parties that make up the ‘engine block’ have expressed a clear preference for a majority coalition in both the lower and upper house. However, current informateur Herman Tjeenk Willink, the impartial ‘elder statesman’ guiding the coalition negotiations, has said that he is keeping all options open, including a minority government.

In addition, PM Rutte has shown that he is adept at navigating such an environment. The current coalition does not have a majority in the upper house and Rutte has had to broker many a deal with opposition parties to get the government agenda through the upper house. This has provided some political headaches for the governing coalition over the past four years, but has not proved to be unworkable. Should the current formation process end in a minority cabinet, then this will probably prevent radical policy changes like an overhaul of the Dutch tax system.

Are new elections possible?

These are certainly possible, but that would be a first in the Netherlands. It has not happened yet that a new coalition couldn’t eventually be formed. This time the background is a bit different though, with the second largest party behind a cordon sanitaire. In 1977 the second party was given a shot at forming a coalition after the largest party failed to assemble one. Given that this time that is Geert Wilders’ PVV, it seems unlikely that the other parties would let that happen. They would probably rather negotiate for a bit longer or chance it on a minority government.

Geert Wilders after all?

Political commentators in the Netherlands are pointing out that, democratically speaking, it’s somewhat odd that the engine block is ignoring the second largest party in parliament: Geert Wilders’ anti-globalist PVV. But Wilders has maneuvered himself into an impossible situation: by unexpectedly dropping his support for the then governing minority coalition of VVD and CDA in 2012 he’s branded himself an unreliable political partner. Together with his sharp anti-Islam and anti-immigrant rhetoric, this has made him persona non grata at the negotiation table. So even if it is democratically questionable to discount a political party outright, it seems highly unlikely that Geert Wilders will be receiving an invitation to join the formations anytime soon.

It is also debatable if Wilders would himself be up for this: in a coalition with three other parties he would certainly have to give up most of his ideas, at least his more radical ones (like quitting the European Union).

What do we think is the most likely outcome?

In our view a coalition without Geert Wilders will be formed. Most likely this will be with the engine block of VVD, CDA and D66. Whether or not they are able to form a majority cabinet with either GroenLinks or ChristenUnie, or form some kind of minority government, we believe that a new relatively stable government would be viable. We therefore do not see new elections as an important scenario.

Jesse Groenewegen
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
Nic Vrieselaar
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 6 2216 2257

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