FACTBOX-Political risks to watch in the Netherlands

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)

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