Global Insight Perspective

Significance

This election was brought forward by the collapse of the Christian Democratic Appeal’s last coalition in June, and is the third contest since 2002. The Netherlands has endured a protracted period of political turbulence, although Prime Minister Jan Peter Balkenende has managed to stabilise the situation more effectively than originally seemed possible.

Implications

Polls over recent weeks have shown the CDA open up a lead over opposition Labour, despite the coalition's collapse and the deep unpopularity of structural reforms. The revival has been due in part to the recovering economy and the government's tough line on immigration and social integration.

Outlook

It is almost certain that whoever wins will not be able to build a majority in alliance with one other party alone; any coalition bringing in other smaller and more radical parties—or a “grand coalition”—will face greater stability concerns. The Netherlands is not about to return to the acute instability of the 2002/03 period, but coalition negotiations could drag on for a protracted period.

Polls Show Close Race

There has been something of a rollercoaster ride for the Dutch polls over the past year. At the start it seemed that the opposition Labour Party (PvdA) would finally avenge its traumatic defeat in 2002 and return to power under the telegenic Wouter Bos. The Christian Democratic Appeal (CDA) was in trouble as its coalition with the People's Party for Freedom and Democracy (VVD) and Democrats 66 (D66) came unstuck, and as reforms to healthcare insurance and deployment of troops in Afghanistan ran into heavy opposition. Labour beat the CDA soundly in local elections in March. As the months passed, however, the PvdA's resurgence began to lose steam and polls from September onwards showed the CDA in the lead once more. This was largely thanks to the reviving economy and some campaign missteps by Bos.

However, just when the CDA’s victory appeared settled, the very latest polls show that all is not lost for the PvdA. A survey by Maurice de Hond shows that there is now nothing to separate a CDA-VVD-Christian Union (CU) alliance and a PvdA-Socialist Party (SP)-Green Left (GL) alliance, both with 69 projected seats in the 150-strong parliament. The CDA is likely to emerge as the largest single party (polls give it 40-45 seats against the PvdA's 34-36), and would therefore be asked to form a government, but it may find it impossible to build a majority coalition. That could conceivably mean the PvdA being asked to form the government instead, or the two old enemies forming a “grand coalition”. What is more, some 30% of voters say they are still undecided, and the final televised debate tonight could still push the PvdA ahead of the CDA. A big question-mark hangs over the performance of the SP. Previously a very small party, latest polls suggest that it could even nudge the VVD into third place. The CDA is counting on a strong VVD performance, but it may well shed five or more seats. That party has been hurt by the moderate revival of the far-right.

Most of the scenarios are unsettling—even the obvious right-wing and left-wing coalitions would have internal problems given their policy differences. The centrist D66, which used to complete the outgoing government's line-up, may well disappear from parliament altogether. If the SP plays a key role in the next government, it will act as a significant brake on much-needed structural reform.

Divisive Issues Take a Back Seat

Ever since the turbulence caused by the ascendancy of the far-right in 2002 and the subsequent murder of film-maker Theo Van Gogh by a Muslim radical, immigration has been a core political issue in the Netherlands. This remains the case in this election, although somewhat surprisingly neither of the big parties has made a big issue of it in their campaigns. The government has lately proposed a controversial ban on wearing the burqa veil, but has reached consensus with the PvdA on the matter. The lack of emphasis on immigration is probably shrewd as otherwise it could play into the hands of the far-right movement. The latter is a shadow of its former self, partly thanks to the major centre-right parties' embrace of a more hardline immigration policy of their own. VVD Immigration Minister Rita Verdonk has been the more prominent hardliner in government.

Another big issue that has also been strangely quiet in this election is "Europe". Dutch voters last year rejected the proposed European Union (EU) constitution, but this has not weakened Prime Minister Jan Peter Balkenende as much as might be expected. This is partly because the PvdA was also among the constitution's backers, and it is not in its interests to revive the controversy. Latest polls show that voters would reject the constitution again if asked today. Balkenende has not said whether he would make a renewed push with the constitution, but with polls as they are, it is safe to assume that he is no hurry. The SP argues "no should mean no", so a left-wing coalition would be even more unlikely to broach the issue again.

Balkenende Plays the "Normality" Card

The 50-year-old Balkenende has endured a very bumpy ride since becoming prime minister in 2002, but has performed better than most expected. His uncharismatic "Harry Potter" image contrasts with that of other, more flamboyant politicians and he has been hurt by some very unpopular market-oriented social policies. He has also led the country through several years of recession. But despite all of this, many voters have come to trust him and respect his "normality". Stronger economic growth and falling unemployment is now greatly assisting the recovery of his popularity as the feel-good factor takes effect. There is now greater public acceptance of the need for structural reform to improve the economy's longer-term prospects.

Bos is Too Much for Some

Forty-three-year-old PvdA leader Wouter Bos is a great contrast to Balkenende, with a telegenic style and slick presentation. He was formerly a Shell executive and is part of the new generation of centre-left politicians. His dynamism may have helped the PvdA revitalise its image, but many voters have lately been drifting away. Bos is widely derided for being too slick and for being too opportunist with his policies. He also faces internal criticism from left-wingers within his party who feel he has pushed the "modernisation" agenda too far. His calls for a brake on structural reforms and higher levies on the wealthy have meanwhile worried businesses and the middle classes.

Outlook and Implications

Given how little there is to separate the right-wing and left-wing groupings, the Netherlands appears set for yet more coalition instability. The CDA is ahead, but its VVD partners will almost certainly not provide enough seats to form an outright majority. A “grand coalition” with Labour is by no means unheard of, but it is a recipe for policy gridlock. Against the odds, the CDA and VVD have made some decent progress with structural reforms, but these cannot be allowed to stall. The main achievements on this front to date include a big cut in those entitled to unemployment and disability benefit, an overhaul of healthcare insurance, and the removal of early retirement incentives. There are also a number of contentious privatisations in the works. The Dutch economy may have revived impressively, but there remain many structural problems. There is a good chance that coalition negotiations will drag on for a considerable period, during which time new initiatives will be very difficult to launch. The PvdA is no stranger to structural reform, but if it forms a government with the SP rather than VVD, its enthusiasm on this front would be much diminished.

Contact: Raul Dary

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