The Dutch miracle

The coalition, led by Prime Minister Mark Rutte, consisted of conservative Liberals and Christian Democrats but was backed by the Freedom Party of extreme-right populist Geert Wilders. He pulled the plug last weekend because he refused to accept budget cuts that are necessary to bring the Dutch budget deficit for 2013 in line with European norms.

The fall of the Rutte government set off alarm bells in the Netherlands but also in the rest of Europe. At home, many were afraid that in the run-up to new elections in September, the country would face months of political paralysis. That would make it impossible to present a budget for next year that would be acceptable for the European Commission that is carefully monitoring all EU countries to see whether they live up to the tough standards established to overcome the crisis in the eurozone. Many analysts were afraid that the Netherlands might be downgraded by the rating agencies and lose its favorable AAA rating.

In other European capitals, especially in Brussels and Berlin, the collapse of the government led to speculation that the Dutch might be moving away from their close understanding with German Chancellor Angela Merkel on the need for fiscal discipline. As The New York Times put it: “The Dutch surprise came in the same weekend as the first round-round victory in France of the Socialist Francois Hollande (known for his opposition to the German/Dutch push for more austerity), leading commentators to joke that Mrs. [Angela] Merkel has two nightmares, ‘Holland and Hollande’.” Would the combination of Dutch impossibility and French unwillingness be the beginning of the end of the European plans to save the euro?

We will only know what is going to happen in Paris after May 6, the second round of the French presidential elections. In the Netherlands, things took a surprising turn. After 48 hours of hectic negotiations, Rutte and his Finance Minister Jan Kees de Jager were able to present a budget deal reducing the 2013 deficit to 3 percent, as mandated by eurozone ministers last year, which is supported by a new majority in the Dutch parliament. Apart from the two old governing parties, three smaller parties have agreed to the new budget plans: the left liberal D66, the Greens and the progressive Christian Union. The five parties make up an odd coalition but they have been here before. In 2011 these same five parties agreed to send police trainers to Afghanistan after Mr. Wilders refused to support this mission. They have been known since as the “Kunduz coalition.”

It was not easy, especially for the Greens, to sign up to a budget proposal that includes higher value-added taxes and a freeze on public sector wages. What they got in return were long postponed reforms in the labor and housing markets and a revision of old plans on health, education and development-aid cuts. All five parties had to compromise on key elements of their electoral platforms. They were only willing to do so because they knew that not doing so would cause major problems for the country and could damage the credibility of the Netherlands for a long time to come. They had to set aside their differences and concentrate on a package of budget cuts and reforms that was acceptable for all of them. Most observers agree that the miraculous budget deal is the ultimate example of the Dutch consensus-building tradition.

The remarkable budget agreement among the center-right and center-left parties was, not surprisingly, heavily criticized by the populist parties on the right and on the left. They blame the EU for imposing these cuts and their colleagues for giving in to that pressure. Both hope to profit from their Brussels bashing at the ballot box in September.

The intense debate on the 2013 budget highlighted one of the classic dilemmas in politics: to agree with an only partially satisfying compromise in order to move on or to refuse such a deal and remain on the sidelines with clean but empty hands. I am sure we will see more of these hard choices when the Turkish Parliament will have to decide on the new constitution shortly. Again, the options will be the same: find a compromise because the country needs one or stress your own red lines and let others do the dirty work of finding a solution. Let’s hope we will soon witness a Turkish miracle, too.