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Dutch government quits after austerity talks fail

FILE - In this June 7, 2010 file photo current Prime Minister Mark Rutte of the free-market Liberal Party, left, Jan Peter Balkenende, former prime minister and head of the Christian Democratic Alliance, center, and Geert Wilders, the flamboyant bleach-blond leader of the populist Freedom Party, right, wait for the start of a televised election debate at the Erasmus University in Rotterdam, Netherlands. Time seems to run out for the minority government as seven weeks of talks to hammer out an austerity package aimed at bringing the Dutch budget deficit back within European Union limits collapsed Saturday April 21, 2012, the prime minister said, laying the blame squarely with anti-EU lawmaker Geert Wilders. Prime Minister Mark Rutte said his minority Cabinet will hold a crisis meeting Monday April 23, 2012 to discuss what to do now. 'Elections are the logical next step,' Rutte said, but he added that he wants to work with parliament to hammer out austerity measures before a poll can take place. FILE - In this June 7, 2010 file photo current Prime Minister Mark Rutte of the free-market Liberal Party, left, Jan Peter Balkenende, former prime minister and head of the Christian Democratic Alliance, center, and Geert Wilders, the flamboyant bleach-blond leader of the populist Freedom Party, right, wait for the start of a televised election debate at the Erasmus University in Rotterdam, Netherlands. Time seems to run out for the minority government as seven weeks of talks to hammer out an austerity package aimed at bringing the Dutch budget deficit back within European Union limits collapsed Saturday April 21, 2012, the prime minister said, laying the blame squarely with anti-EU lawmaker Geert Wilders. Prime Minister Mark Rutte said his minority Cabinet will hold a crisis meeting Monday April 23, 2012 to discuss what to do now. "Elections are the logical next step," Rutte said, but he added that he wants to work with parliament to hammer out austerity measures before a poll can take place. (AP Photo/Peter Dejong, File)
By Mike Corder and Toby Sterling
Associated Press / April 23, 2012
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THE HAGUE, Netherlands—The Dutch government, one of the most vocal critics of European countries failing to rein in their budgets, quit Monday after failing to agree on a plan to bring its own deficit in line with EU rules.

Prime Minister Mark Rutte tendered the resignation of his entire Cabinet to Queen Beatrix, effective immediately, after Rutte informed her talks on a new austerity package collapsed over the weekend.

Rutte is to debate with parliament Tuesday on whether and how his caretaker government can still improve the budget, and when to schedule new elections. No date was immediately announced, but opposition lawmakers called for a vote in late June.

Opposition Labor Party leader Diederik Samsom accused Rutte of "dropping the ball at the worst possible moment" for the Dutch economy and demanded elections as soon as possible.

The Dutch government collapse came a day after the first round election victory of France's socialist candidate Francois Hollande, who has said he wants to focus less on austerity and more on economic growth.

The two developments call into question whether budget-cutting policies that are causing trauma in countries such as Greece, Spain and Portugal can be enforced even in "core" European countries such as France -- or in the Netherlands, one of the few along with Germany to maintain an AAA credit rating.

Rutte's hopes to clinch a deal to lower the deficit to within the EU's 3 percent target evaporated Saturday when his most important political ally, populist euroskeptic Geert Wilders, cut off talks, saying a slavish adherence to European rules was foolish and would harm the Dutch economy.

It doesn't make sense "to suffer for the sake of the dictators in Brussels," Wilders said.

Many agree the target is too aggressive, including the government's own economic think tank the Central Plan Bureau. Others, such as Dutch Central Bank President Klaas Knot, say meeting it is vital to keep the country's financial reputation intact.

European Commissioner Neelie Kroes called Wilders a hypocrite, since the Netherlands itself, along with Germany, had been one of the loudest in demanding Brussels adopt the 3 percent deficit limit in the first place.

"Pointing to Brussels now is dumb, it's untrue, it's distracting, and it doesn't solve anything," said Kroes, who is a member of Rutte's free-market VVD party.

A spokesman for the German finance ministry said that despite the seemingly negative developments, approval for European austerity is actually "increasing."

"We should not now simply let ourselves be thrown off track by daily developments," Martin Kotthaus told reporters in Berlin.

He said Europe's recent reforms had been well-received at a weekend meeting of the International Monetary Fund.

"We certainly have a great many very difficult reforms, measures and times in front of us, but the road seems to be the right one," he said.

Netherlands Finance Minister Jan Kees de Jager said he will still submit an outline budget to Brussels by April 30, as mandated by European rules.

He said he was optimistic about working with opposition parties in Parliament on cost-cutting.

"We'll show the financial markets, in consultation with Parliament, that the Netherlands' decades-long budgetary discipline will remain," he told reporters.

Opposition lawmakers say they are prepared to cooperate with Rutte on drawing up a 2013 budget.

However, Labor leader Samsom said EU norms are not sacred.

"As far as we are concerned, you don't have to reach 3 percent by 2013," he said.

Although the Netherlands has relatively low levels of national debt, its economy is in recession and it is expected to post a deficit of 4.6 percent in 2012.

The package Rutte had been negotiating with Wilders would have slashed foreign aid and hastened a planned increase in the retirement age to 66 from 65.

Wilders, who is publishing a book in the U.S. next week about his struggle against Islam, pulled support for the austerity plan abruptly on Saturday, saying it was too hard on the elderly.

Yields on Dutch bonds were up 0.11 of a percent higher than they were before the weekend. Netherlands government bonds are now trading around 2.35 percent for 10-year debt, about 0.6 percentage points more than Germany.

Ratings agency Fitch last week warned the Netherlands must cut its deficit to keep its AAA credit rating.

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Sterling reported from Amsterdam.

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