UPDATE 2-Dutch PM sees elections as budget talks fail

Sat Apr 21, 2012 11:16am EDT

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By Anthony Deutsch and Gilbert Kreijger

AMSTERDAM, April 21 (Reuters) - The Netherlands looked headed for early elections after the collapse of budget talks on Saturday, although Prime Minister Mark Rutte said he would try to reach a deal that would reassure financial markets as Europe's debt crisis deepens.

"Elections are to be expected now. I will talk to parliament (on) how to get through this situation," Prime Minister Mark Rutte, in power since elections in 2010, told reporters.

Rutte's Liberal-Christian Democrat government and its ally, Geert Wilders' Freedom Party, had been in talks for weeks, trying to reach a deal to cut about 14 billion to 16 billion euros from the annual budget.

The cuts are essential if the Netherlands is to bring its deficit back to below the European Union's target of 3 percent of gross domestic product and ease concerns which saw it threatened with a downgrade of its credit rating on Friday.

Wilders, whose party opposes immigration and euro zone bailouts, called for elections to be held "as soon as possible."

"I had hoped we would work something out, but this package is unacceptable for our party and the country," Wilders told journalists. "It's time to go to the Dutch voters."

The Dutch government has been among one of Germany's strongest supporters in its push to force through a new pact on fiscal responsibility in the euro zone - one key element of efforts to see off the wider debt crisis.

The Netherlands is one of four euro countries with a coveted triple-A rating, but concerns over its finances have remained in the background as the minority administration struggled to reach agreement on the budget cutbacks.

The breakdown of the talks follows a warning from ratings agency Fitch that the country was on the verge of a downgrade in its credit status due to high debt.

Rutte in the past has drawn support from the left-leaning Labour party to pass legislation on euro zone issues.

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