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Holland enters in Euro risk zone as political parties clash over further austerity

Wednesday, April 25th 2012 - 06:51 UTC
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PM Mark Rutte appeals to Parliament PM Mark Rutte appeals to Parliament

Holland one of the few show cases of Europe with all economic indicators the envy of its fellow EU members has stalled in a political controversy while at the other end Greece sees no end to suffering in its fifth year of recession.

The Dutch prime minister said on Tuesday his country faced a crisis and asked parliament to push through budget cuts after his government lost the support of its main political ally and tendered its resignation.

But the main opposition parties signalled they would not back the 14 to 16 billion Euro savings package he must present to the European Union next week to show the Netherlands is on track to meet its stringent budget limit.

The Netherlands has been one of the Euro zone's most stable members but the minority coalition's split with the populist Freedom Party has created a political vacuum, worrying financial markets and the Moody's credit rating agency.

A Dutch bond sale went smoothly on Tuesday, calming financial markets but investors are waiting to see whether he can find new backers for the cuts and agree an election date with other political parties.

“Standing still is not good for the Netherlands. The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford,” Prime Minister Mark Rutte told parliament on Tuesday.

“Those are the facts and nobody can run away from them. I'm standing here without pretence; it is up to parliament and the voters.”

Geert Wilders' Freedom Party had backed the government for the past 18 months but said he was no longer willing to be dictated to by Europe.

“It is the government, not the citizen, not Henk and Ingrid, who spent too much. Either we choose to act in the interests of Henk and Ingrid or we act in the interests of Brussels,” Wilders said.

The Netherlands must bring its deficit to 3% of GDP, the EU limit, next year but it is forecast to be 4.6% unless extra cuts are made.

Meanwhile the Greek Central bank announced that the economy will contract a deeper than expected 5% this year. The projection topped a previous forecast the central bank made in March, when it projected the 215 billion Euro economy would contract 4.5% after a 6.9% slump in 2011.

Twice bailed-out Greece is in its fifth consecutive year of recession.

Speaking to shareholders at the central bank's annual assembly, George Provopoulos, also a European Central Bank Governing Council member, urged strict adherence to reform and fiscal adjustment commitments Greece has agreed with its euro zone partners, saying they were needed to return the economy to sustainable growth.

Provopoulos warned that Greece's Euro zone membership was at stake if it failed to follow through on its pledges, especially after national elections next month.

”If following the (May 6) election doubt emerges about the new government and society's will to implement the program, the current favourable prospects will reverse,” he warned.

Categories: Economy, Politics, International.

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