The Associated Press April 26, 2012, 1:27PM ET

Dutch politicians agree austerity budget deal

The Dutch caretaker government and several opposition parties said Thursday they have done in a matter of days what the Cabinet failed to do in seven weeks: craft a provisional 2013 austerity budget.

The news comes just three days after Prime Minister Mark Rutte's conservative government collapsed over its failure to agree on budget cuts with its right-wing political ally, the party of euro-skeptic Geert Wilders.

The Dutch failure, along with prospects for the election of socialist Francois Hollande in French national elections, had set off a debate about whether "core" European countries will be able to meet European budget deficit limits of 3 percent, let alone highly stressed countries such as Greece and Spain.

But the surprise accord, if it holds, should return the Netherlands to the list of most fiscally conservative nations and justify its AAA credit rating.

Finance Minister Jan Kees de Jager, the architect of the deal, said Thursday that the package would be "sufficient to satisfy European rules," without elaborating.

Although national debt is relatively low in the Netherlands, the country is in recession and it is set to run a 4.6 percent deficit this year -- well above the 3 percent limit mandated by European rules. The Dutch government had been among the most vocal in demanding the rules be enforced, which made the apparent failure appear a major embarrassment for The Hague.

Finding a new plan to meet a Brussels-mandated April 30 deadline for draft 2013 budgets seemed unlikely given the timing of Wilders' walkout, and few political analysts thought opposition parties would be willing to take responsibility for what are likely politically unpopular spending cuts ahead of new elections scheduled for September.

But Rutte's free-market VVD party, De Jager's Christian Democrats, and three smaller left-leaning parties said they had found common ground and sent an outline to their parties for internal debate Thursday.

They emerged within hours, saying they were all on board. Most details have not been released, but politicians discussing the deal ahead of a meeting in Parliament said they include pay freezes for public servants, pension cuts, and housing market reforms.

The agreement will now be vetted by government economists and subjected to withering criticism in parliament, but it is a remarkable political achievement.

It also is not certain whether the deal will return the Dutch deficit to 3 percent by 2013, though that may depend on economic growth forecasts.

The three opposition parties participating were bitterly opposed to most policies of Rutte's former ally Wilders and his "Freedom" party. Freedom grew to become the country's third largest party on an anti-immigration and anti-Islam platform, though recent polls have showed it is losing support.

Wilders walked out of austerity talks on Saturday, precipitating the government collapse, a week before he is about to launch his English-language autobiography in the U.S.

His departure also left Cabinet with little time to negotiate a plan B and avoid a humiliation in Brussels.

Alexander Pechtold, the leader of the small centrist D-66 party, said the swift agreement was evidence Rutte had been wrong to cooperate with Wilders in the first place.

"This is the other way to do things," he tweeted.


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