UPDATE 3-Major Dutch opposition party still backs Greek aid

Wed Oct 5, 2011 11:44am EDT

* Labour party says bailout package must be decisive

* Opposition says will not support more austerity measures

* Government party says all options open for extra budget cuts

* Finance minister opposed to common issue euro bonds (Adds vote on EFSF bailout fund brought forward to Oct. 6)

By Aaron Gray-Block

AMSTERDAM, Oct 5 (Reuters) - The Netherlands' largest opposition party said it still supports a bailout package for Greece under certain conditions, indicating a deal will be approved when parliament votes on Thursday on widening the role of the euro zone rescue fund.

The minority coalition government of Liberals and Christian Democrats needs the support of pro-European opposition parties to win approval because its main ally, the eurosceptic Freedom Party, is firmly opposed to bailouts.

The parliament brought forward the date of the EFSF vote to Oct. 6, from a previous tentative date of Oct. 12. The deal to widen the role of the EFSF, agreed by European leaders in July, is seen as critical to demonstrate the euro zone's resolve to shield its vulnerable debtor economies.

The Netherlands, Malta and Slovakia are the last of the 17 euro zone nations to vote on the EFSF changes. Malta is expected to approve the changes later on Wednesday.

"We support a Greek rescue package provided that banks contribute, provided that the new support fund is more decisive and is large enough to prevent contagion," Ronald Plasterk, Labour's finance spokesman, told parliament on Wednesday.

Labour's support would be enough with the Liberal and Christian Democrat votes to ensure a Dutch parliamentary majority to endorse the EFSF changes.

A succession of opinion polls has shown that public backing for bailouts is wearing thin in the Netherlands, where the government is known for its conservative fiscal policies.

Last month the government called for the EU to appoint a new budget tsar with powers to dictate taxes and spending in euro zone countries.

Finance Minister Jan Kees de Jager reiterated on Wednesday he was opposed to introducing jointly-issued euro bonds as a means of countering the crisis, calling instead for stricter enforcement of fiscal regulations.

"Euro bonds are therefore only possible in the long term and not suitable as a crisis instrument," De Jager said.

The minister said that if joint bonds were introduced, this would add, in the long term, 6.5 billion to 7 billion euros in extra annual interest costs on the Dutch government's debt.

"The higher loan costs for Dutch state debt will also have an effect on institutions that are dependent on Dutch creditworthiness such as Dutch-based banks," De Jager said, adding it could lead to higher interest costs for businesses and the public.

EXTRA BUDGET CUTS

Lawmakers are discussing the euro zone crisis and 2012 Dutch budget on Wednesday and Thursday, with De Jager due to address parliament on Thursday.

The government aims to cut 18 billion euros ($24 billion) from the budget by 2015 to balance its books. In the 2012 budget, released on Sept. 16, De Jager stressed the vulnerability of the Netherlands' export-oriented economy, the euro zone's fifth largest, to deteriorating global conditions.

The government plans to cut back on social welfare and healthcare spending, slash the defence budget and raise the retirement age, and has hinted that additional cuts may be needed if the euro zone debt crisis worsens.

Labour's Plasterk warned the government his party would not support additional budget cuts, saying cuts already announced would mainly affect low- and middle-income earners.

But Christian Democrat MP Elly Blanksma said: "We have strict budget rules. If the deficit increases we need to take additional measures ... and from our point of view everything is on the negotiating table."

Geert Wilders' Freedom Party has already warned that it will not support more austerity measures prompted by the Greek crisis.

Prime Minister Mark Rutte has said that the government will need "tough talks" with the Freedom Party if extra budget cuts prove necessary in coming years. ($1 = 0.753 Euros) (Reporting by Aaron Gray-Block; Editing by Ruth Pitchford)

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