ING: New elections may be needed in Netherlands as pressure on Rutte grows

With many parties indicating that they do not want to join Rutte in a new cabinet, new elections may be needed, analysts at Dutch bank ING wrote on Monday. Despite all the political drama in Den Haag since last month’s general election, the bank is not changing their previous optimistic predictions for the Dutch economy through 2023.

The current political mistrust makes it difficult for the outgoing cabinet to decide on important matters, with the exception of coronavirus-related policies and expanding existing support measures for the economy, the analysts argued. Last Thursday, Rutte’s two largest coalition partners, D66 and CDA, brought forward a motion of censure against him after he narrowly won a no-confidence vote with his image severely damaged. The bank noted that Rutte only held support from his own party after accusations were made against him for misleading parliamentarians on the nature of his discussion with the officially selected scouts who were aiding in coalition building.

A memo prepared for one scout, Cabinet member Kajsa Ollongren, was photographed by a reporter as she rushed out of meetings after testing positive for the SARS-CoV-2 coronavirus infection. The contents of the note suggested that someone wanted CDA member Pieter Omtzigt out of national politics. Omtzigt was the second-highest vote getter of all candidates put forward by the CDA. As the scandal unfolded, it emerged from meeting notes that Omtzigt was discussed by Rutte and the scouts, a conversation which the caretaker prime minister said he could not recall with any clarity. After the censure vote, the junior coalition partner ChristinUnie said it will not take part in a fourth Rutte Cabinet.

”There are two major consequences of all this. The first is that the formation of a new coalition will probably take longer than expected. The second is the chances that the current coalition can continue are clearly diminished,” the bank said. Aside from giving voters another shot at the ballot box, the bank said two possible scenarios could be either another coalition led by the VVD but without Rutte at the helm, or "a rainbow coalition" led by the D66. The latter would require support from up to eight parties including social liberal, Christian, and left-wing or broadly progressive ideals that exclude the VVD altogether.

“The current caretaker government, led by Rutte, will govern until a new one has been formed. This can take months and the current political distrust makes it more difficult to decide on anything material in the meantime, with the exception of its handling of the pandemic and the extension of existing economic support measures,” the ING brief stated.

”The Dutch economy, therefore, is unlikely to benefit from a post-covid economic recovery plan this year, which Rutte suggested would have to be decided upon as quickly as possible.”

However, as this possible additional fiscal stimulus wasn’t part of the current economic forecast by ING, their predictions remained optimistic. Due to the continuing lockdown, a decrease in the first quarter of 2021 is still expected. However, if coronavirus measures can be phased out during the year, the recovery should gain momentum.

After a contraction of 3.8 percent last year, the bank expects that Dutch GDP will grow by 2.4 percent this year, 3.3% next year, and 1.6% in 2023.