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Analysts view: Liberals lead Dutch poll, policy deadlock likely

AMSTERDAM (Reuters) - A one-seat lead by the austerity-minded Liberals in Wednesday’s Dutch election is likely to result in prolonged coalition talks that will delay steps to tackle a growing government budget deficit.

Parties differ widely on how to cut a deficit projected to reach 6.6 percent of GDP this year. The Liberals have called for the deepest cuts, of up to 39 billion euros ($52 billion). Labour is proposing smaller cuts.

Following are comments from analysts:

JAN VIS, FORMER MEMBER OF GOVERNMENT COUNSELLING BODY RAAD

VAN STATE

“The political environment has changed dramatically. The political center has been halved and this means governing will be much more difficult, it will be difficult to form coalitions.

“Weak coalitions risk becoming the victim of differences of opinions and they will surface... A uniform cabinet is of the utmost importance, otherwise it will collapse and we will have elections a year from now.”

PHILIP VAN PRAAG, POLITICAL SCIENCE PROFESSOR, UNIVERSITY OF

AMSTERDAM

“Formation of a cabinet will be incredibly difficult. Forming a Purple Plus coalition (between Labour, Liberals, D66 and Green Left) poses a serious threat for the Liberals. They will have to become more social, which gives room for the PVV to distinguish themselves better,” Van Praag told Dutch daily AD.

“On the other hand I wouldn’t be surprised if Labour and the Christian Democrats would try it again in three or four months. Now (former Labour leader and finance minister) Bos and (former Christian Democrat leader and prime minister) Balkenende are both gone, a lot of pain has been taken away.”

SEP VAN DE VOORT, SNS SECURITIES

“Liberal leader and intended PM (Mark) Rutte has promised a new government before July 1 which is a hilarious expectation, considering the Dutch history of taking months for a new government to be established.

“However if he wants his deadline to be reached, he should quickly head in the direction of this VVD-PVV-CDA combination as it would be the only feasible 3 party combination.”

JAAP MEIJER, EVOLUTION SECURITIES

“Holland will need three or four parties to form a government, with the Liberals and Labour to be part of such a coalition.

“There is no majority to reduce tax deductibility of interest on mortgages. Good news for the housing market. No majority to increase top income tax rate, but bank tax likely, which is already in our forecasts.”

MAUREEN SCHULLER, ANALYST AT ING CREDIT STRATEGY

“The fact that the outcome of the elections will provide no obvious coalition increases the odds of a lengthier formation process.

“The larger the mixture of political ideologies in this coalition the greater the chances are that important reforms in the field of deficit reductions, healthcare, education, housing markets will become paralyzed.

“This situation, if a negative for confidence in the strength of the Dutch budgetary policy and economic outlook, could also reflect negatively on Dutch credits. The past half year’s peripheral turmoil has taught us the hard way that the two are undeniably linked.”

ALINE SCHUILING, ECONOMIST AT FORTIS BANK NEDERLAND

“As expected, the results of the general elections in the Netherlands show that the formation of a new coalition government will be a very tough job.

“A so-called Purple-Plus coalition (VVD, PvdA, D66 and Green Left) would have a comfortable majority of 81 seats in the (150-seated) parliament.

“The formation of such a four-party coalition and the drawing up of a policy agenda will probably be complicated and could take a long time, implying that it will take a while before any policy changes will be implemented.”

WALTER LEERING, FIXED INCOME ANALYST AT DUTCH PRIVATE BANK

THEODOOR GILISSEN

“Although it seems to be difficult to quickly form a stable government I don’t think there will be a significant response on the bond markets. Only if it were to take a very long time or if were it very difficult would you see an impact but I don’t expect it. In Belgium with all its political unrest we have also seen no direct reaction from the bond markets.”

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