UPDATE 3-Dutch PM wins election, tough fiscal stance likely

Thu Sep 13, 2012 7:43am EDT

Related Topics

* Rutte's Liberals biggest party in parliament

* Liberals and Labour seen as coalition partners

* Coalition talks to start on Thursday, likely to be lengthy

* Eurosceptics from hard left, far right lose out

By Thomas Escritt and Gilbert Kreijger

AMSTERDAM, Sept 13 (Reuters) - Dutch Prime Minister Mark Rutte, one of the few European leaders to survive an election during the euro zone crisis, is expected to form a coalition with his close rival, Labour, and stay committed to a policy of fiscal discipline.

The victory of two centrist, pro-European parties in the general election on Wednesday was hailed by analysts and investors as a sign that one of Europe's richest countries remained a close ally of Berlin.

Liberal Party leader Rutte's last government, which fell after two years, repeatedly urged fiscal discipline on the indebted countries of southern Europe, while insisting that the Netherlands also needed to implement painful austerity measures to meet European Union deficit targets.

The pro-business Liberals won 41 seats in the 150-seat chamber, while Diederik Samsom's Labour Party came second with 39 seats, results showed on Thursday.

Coalition talks will start later on Thursday and typically take weeks or even months in the Netherlands.

The chairwoman of the lower house of parliament, Gerdi Verbeet, spoke by telephone to all the party leaders on Thursday morning, and will meet them at 1200 GMT.

Afterwards, she will inform Queen Beatrix about which procedure parliament will follow in forming a new cabinet.

While Labour is seen as the most obvious partner, Rutte may lose his ally, the outspoken Finance Minister Jan Kees de Jager, whose Christian Democrat party - which has dominated the Dutch post-war political landscape - crashed to its worst result ever, coming fifth.

Voters in one of Europe's last countries with a triple-A credit rating roundly rejected two anti-European fringe parties that dominated the early stages of the campaign, reassuring investors who feared the Netherlands might reject Berlin's strategy for dealing with the euro zone debt crisis.

"Moderate parties that are firmly in the pro-euro camp and committed to fiscal discipline emerged as the winners at a crucial time for the euro zone," said Riccardo Barbieri Hermitte, chief European economist at Mizuho International.

Together, Labour and Liberals would command a comfortable majority in the lower chamber of parliament, although they would need a third party to have majority support in the senate, or upper chamber.

TOUGH TALKS AHEAD

Party leaders were expected to meet in The Hague later on Thursday to begin coalition talks, which at least one senior Liberal figure said would be difficult.

"There are two clear winners who are substantially different from each other," Jozias van Aartsen, the mayor of The Hague, told Dutch radio.

During its campaign, Labour called for a slower pace of cuts in order to allow for fiscal stimulus at home, and Samsom said he was prepared to allow Greece more time to meet its targets "if that is good for Europe".

In contrast, Rutte emphasised that fiscal discipline was essential, and Greece should not get a third bailout.

Whatever the differences, parliamentary arithmetic means it would be almost impossible to form a coalition that did not include these two leading parties of left and right.

"Whatever coalition is formed it will include these two," said Rudy Andeweg, professor of politics at Leiden University.

Rutte and Samsom were keeping their cards close to their chests on Thursday, with Rutte telling reporters he would be "silent" about attempts to form a cabinet. Samsom has not yet commented.

WILDERS SUPPORT FADES

The leader of the anti-immigration Freedom Party, Geert Wilders, tried to turn the election into a referendum on Europe, saying he would pull the country out of the 27-nation bloc and reintroduce the Dutch guilder. He won 15 seats, almost halving his parliamentary representation.

The Socialist Party, which opposed austerity at home and abroad and characterised euro zone bailouts as hand-outs to banks, also won 15 seats, unchanged from the previous election.

Rutte made increasingly eurosceptic noises as the campaign progressed, though analysts saw this as a part of a strategy to win over Freedom Party supporters.

Sweder van Wijnbergen, a University of Amsterdam economist and former Labour junior minister, said the differences between the two parties on fiscal policy and the euro zone were far from insurmountable.

"In the end, Samsom is right that the Greeks should get help as long as they continue their reform programme," he said. "Rutte has wiggle room inside his campaign commitments, and he may be in power for as long as four years, so he has the time to back down."

The parties' differences on meeting the budget deficit target set by the European Union were exaggerated, he said. "The difference is about how quickly you get to the 3 percent limit, not about whether to do so," Van Wijnbergen said.

The budget deficit is forecast at 3.6 percent of gross domestic product this year, falling to 2.7 percent of GDP next year.

Rutte is almost certain to remain prime minister. Traditionally, the second-largest coalition partner names the finance minister, which would come from Labour if the two parties form a government.

Leading Labour candidates for the job include Ronald Plasterk, a former academic biologist and education minister who is the party's finance spokesman, and Coen Teulings, the head of the CPB, the government's economic forecaster.

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