AMSTERDAM, Jan 2 (Reuters) - Dutch Prime Minister Mark
Rutte, one of the few European Union leaders to survive an
election during the euro zone crisis, formed a pro-EU,
pro-austerity coalition with Labour, which came a close second
in the vote in September.
As a close ally of Germany and one of the few AAA-rated euro
zone countries, Netherlands is expected to remain committed to a
policy of fiscal discipline, although its coveted credit rating
is at risk because of the weak economy.
COALITION AGREEMENT
After the election, Rutte and Labour leader Diederik Samsom
agreed to budget cuts of 16 billion euros ($21 billion) over the
next four years, and structural reforms including a reduction in
tax breaks on home loans.
Since then, Rutte's Liberals and Labour have fallen sharply
in popularity in the face of austerity measures, a worsening
economy and rising unemployment.
What to watch:
- Whether both the lower and upper houses of parliament pass
the budget cuts
- Public discontent over the weak economy, fall in house
prices, and impact of austerity measures
EURO ZONE CRISIS
The Netherlands is expected to remain committed to tight
fiscal policies to tackle the euro zone's debt crisis. Like
other euro zone countries, it must approve an EU fiscal treaty
which will enshrine balanced budget rules in national law.
Parliament has been critical of euro zone bailouts in the
past but has supported all such measures so far, including the
latest deal for Greece.
What to watch:
- Political and public support for euro zone bailouts
- A credit downgrade now that both S&P and Moody's have
given the country's rating a negative outlook
BUDGET DEFICIT
Finance Minister Jeroen Dijsselbloem has said the country is
committed to meeting the EU's 3 percent budget deficit rule,
even though both the central bank and the government's economic
forecaster (CPB) warned last month that it would miss the target
this year.
The 2013 budget, agreed by an ad hoc coalition in April
after Rutte's government fell, had aimed to bring the deficit
down to 2.6 percent of GDP with 12 billion euros in tax rises
and spending cuts. The extra 16 billion euros in cuts are
expected to bring the deficit down to 1.4 percent of GDP by
2017.
What to watch:
- Implementation of agreed budget cuts
- Support for other reforms and spending cuts
- Strikes or protests over budget cuts
SOCIAL POLICIES
The Dutch are divided over immigration and the country's
international profile. The new government is expected to
backtrack on some anti-immigration policies which were promoted
by populist politician Geert Wilders.
However, the coalition agreement states that face-covering
garments such as Muslim veils will be banned in schools, public
transport, hospitals, and government buildings, and anyone who
wears such clothing, or who does not speak Dutch, will not be
entitled to social security.
What to watch:
- Anti-immigration sentiment, especially over jobs
($1 = 0.7590 euros)
(Reporting by Sara Webb and Gilbert Kreijger; Editing by Alison
Williams)