Netherlands

Politics:

• Analysis

  Netherlands politics: The aftermath of a football tragedy

  Race in the Netherlands: The aftermath of a football tragedy

  Religious and racial tensions resurface in Dutch society

  ALMERE and Osdorp are two of the working-class suburbs that ring Amsterdam, modern planned towns of blocky flats and town houses interspersed with parks and football fields. In recent years upwardly mobile Muslim and Caribbean immigrants have been leaving the inner city for the suburbs, turning places like these into staging grounds for the Netherlands' rocky integration process. It was here that the country's latest racial tragedy took place.

  After a match against a youth football club in Almere in early December, several teenaged players from a visiting Osdorp team pummelled and brutally kicked a volunteer linesman after an unexplained dispute. The linesman, the father of an Almere player, died the next day. He was white. His young assailants were ethnic Moroccans. The incident has touched off a month-long resurgence of religious and racial tensions that have preoccupied Dutch politics for over a decade. And it has resurrected the fortunes of Geert Wilders, a populist right-wing politician who best exploits those tensions.

  Ethnic and religious conflicts have racked the Netherlands for years. Yet the latest flare-up came as something of a surprise. The euro crisis eclipsed the issues of immigration and Islam last year, leading even Mr Wilders to downplay his demands for banning the burqa and to emphasise anti-European politics instead.

  The Dutch election in September led to a centrist coalition government. Mr Wilders's Freedom Party took just 10% of the vote. But while ethnic politics may have quieted temporarily, the roots of the conflicts are as strong as ever. A report released in mid-December by the Netherlands Institute for Social Research found that social contact between white native Dutch and the main immigrant groups (Moroccan, Turkish, Antillean and Surinamese) has actually shrunk over the past 17 years. Half a century after the first Turkish and Moroccan guest workers arrived in the Netherlands, only 28% of ethnic Turks and 37% of ethnic Moroccans identify themselves strongly as Dutch. And while their Dutch language skills have improved, immigrant groups felt less accepted in Dutch society in 2011 than they had in 2002.

  The authors pin much of the blame on "the image native Dutch have of Muslim groups", which seems only to have worsened in recent years. But Dutch conservatives say immigrants themselves are to blame for their image. Crime rates among young Moroccan men are triple those of white Dutch youths.

  In the aftermath of the football clash, ethnic politics leapt to the fore again. The national football association cancelled every amateur game in the country the next weekend, and with Mark Rutte, the Liberal prime minister, called for measures to reduce violence in sports. Mr Wilders attacked this as political correctness. "We don't have a sports-violence problem, we have a Moroccan problem." He called for the alleged offenders, all aged between 14 and 17, to be stripped of their Dutch citizenship and sent "back" to Morocco.

  A string of other incidents over the past month have scratched ethnic sore spots. An Amsterdam newspaper reported that a social-housing corporation was creating "halal-flats" with partitions separating men and women. A Moroccan woman in a small town stabbed her daughter to death in a possible honour killing, triggering calls for closer police monitoring. And an amusement park established a Muslim prayer room.

  All this has combined to push anxiety over race and religion back to the top of the political agenda. The latest polls give the Freedom Party 17% of the vote, tied with Labour for first place. Mr Rutte's Liberals have slipped to third. Pundits speculating that Mr Wilders's politics had grown stale may have written him off too early.

  January 12, 2013

• Background

  Netherlands: Key figures

  Mark Rutte

  Mr Rutte became Dutch prime minister in October 2010, leading the country's first minority government, after a long and difficult period of coalition-building. Governing without a majority in parliament, Mr Rutte has faced a difficult task of managing the uneasy co-operation between the Christian Democratic Appeal (CDA, his coalition partners) and the formal parliamentary support party, the Party for Freedom (PVV). As leader of the Liberals (VVD) since 2006, Mr Rutte repositioned the party towards the political centre with moderate, neo-liberal policies. He is a skilled debater with a good knowledge of departmental briefs.

  Maxime Verhagen

  Mr Verhagen is the leader of the CDA and has been economy minister and deputy prime minister since October 2010. His party scored its lowest vote share for years at the 2010 election, and was facing a period in opposition, until a right-wing coalition became the preferred option. Elements of the CDA are uncomfortable at the close co-operation with the PVV, but he has so far been able to keep these sentiments in check. Mr Verhagen was an able leader of the CDA parliamentary group from 2002 until early 2007, after which he gained the long-coveted foreign affairs portfolio.

  Geert Wilders

  Mr Wilders has had one of the most stellar rises in Dutch politics in recent times. He is head of the country's third-largest party, the PVV, which he formed after defecting from the VVD in 2004. The PVV rose in popularity in 2008-09, benefiting from Mr Wilders's ability to popularise anti-immigrant, anti-Islamic and anti-establishment ideas, and topped opinion polls for some time. At the 2010 election, the PVV won 15% of the vote and became a formal government support party. Mr Wilders faces the challenge of managing a party that has risen quickly but without building a party structure or a local-government presence. His leadership has also been attacked by internal party critics for lacking democracy. He is being prosecuted for inciting hatred and discrimination, but this action has so far mainly succeeded in raising his profile further.

  Job Cohen

  Mr Cohen, who was mayor of Amsterdam in 2001-10, took over as leader of the Labour Party (PvdA) in the wake of the government's collapse in February 2010. Mr Cohen led the PvdA to second place in the 2010 election but was unable to secure a place for the party in the governing coalition. He now leads the PvdA's parliamentary grouping. Mr Cohen was considered to have been a competent mayor but had never held a high-profile ministerial post before. In the 1990s he was junior government member and was offered the post of education minister. In the 2003 general election he was the PvdA's candidate for prime minister.

  Alexander Pechtold

  The leader of the centrist Democrats 66 (D66) led a remarkable revival after the 2006 general election, when the party almost vanished from the political scene. D66 rose steadily in the polls, to a level where it challenged the largest parties. Mr Pechtold's success has been attributable in large part to his outspoken criticism of Mr Wilders's populism, and for a while he was the leader with the highest appreciation rate, but he was only partly able to translate this popularity into electoral success at the 2010 election. D66 featured only briefly in possible coalition combinations after the election.

  June 07, 2011

• Structure

  Netherlands: Political structure

  Official name

  Kingdom of the Netherlands

  Form of state

  Constitutional monarchy

  National legislature

  Bicameral Staten Generaal (parliament); First Chamber (Eerste Kamer, Senate) of 75 members elected by provincial states (regional parliamentary assemblies); Second Chamber of 150 members, directly elected for a four-year term. The First Chamber can only approve or reject bills and may not initiate or amend them

  Electoral system

  Universal direct suffrage over the age of 18. The whole country forms a single constituency, and the Second Chamber is elected by the d'Hondt system of proportional representation. The First Chamber is elected indirectly

  National elections

  A general election was held on September 12th 2012. The next regular election is not scheduled before September 2016

  Head of state

  Queen Beatrix, who acceded to the throne in 1980. The role of the monarch goes beyond the purely ceremonial. The monarch co-signs new acts of Parliament, contributes to the formation of new governments and presides over the Council of State (an advisory body on legislation and administrative court)

  State legislatures

  The 12 directly elected provincial states are responsible for electing the First Chamber of the Staten Generaal (the Senate) and overseeing regional government. They also have the power to raise regional taxes. The governing executive of each state is elected, but is presided over by a commissioner appointed by the Crown

  National government

  Council of Ministers headed by the prime minister, responsible to the Staten Generaal. A centrist "grand coalition" government of the centre-right People's Party for Freedom and Democracy (VVD) and the centre-left Labour Party (PvdA) was sworn in on November 5th 2012. Although ministers can introduce bills and speak in the legislature, they may not be members of either house

  Main political parties

  People's Party for Freedom and Democracy (Liberals, VVD); Labour Party (PvdA); Party for Freedom (PVV); Socialist Party (SP); Christian Democratic Appeal (CDA); Democrats 66 (D66); Christian Union (CU); GreenLeft (GL); Reformed Political Party (SGP); Party for the Animals (PvdD); 50Plus

  Council of Ministers

  Prime minister: Mark Rutte (VVD)

  Deputy prime minister & minister for social affairs and employment: Lodewijk Asscher (PvdA)

  Key ministers

  Defence: Jeanine Hennis-Plasschaert (VVD)

  Economic affairs, agriculture & innovation

  Education, culture & science: Jet Bussemaker (PvdA)

  Finance: Jeroen Dijsselbloem (PvdA)

  Foreign affairs: Frans Timmermans (PvdA)

  Health, welfare & sport: Edith Schippers (VVD)

  Home affairs & kingdom relations: Ronald Plasterk (PvdA)

  Infrastructure & environment: Melanie Schultz van Haegen-Maas Geesteranus (VVD)

  Justice & security: Ivo Opstelten (VVD)

  Central bank governor

  Klaas Knot

  March 05, 2013

• Outlook

  Netherlands: Key developments

  Outlook for 2013-17

  • The pro-business Liberals (VVD) and centre-left Labour Party (PvdA) formed a "grand coalition" government after the September 2012 general election. At the election, voters returned to the political centre, boosting political stability.
  • However, the coalition's first few months in office have revealed a less effective government than many voters had anticipated. The Economist Intelligence Unit nonetheless expects it to survive a full term until 2016.
  • Ensuring financial stability and narrowing the budget deficit will be a focus of the new government. The deficit is forecast to shrink gradually to 2.4% of GDP by 2017, with public debt peaking at just above 78% of GDP in 2015.
  • We expect another real GDP contraction in 2013, of 0.6%, after a drop of 0.9% in 2012. We forecast sluggish average growth in 2014-17, of 1.4%. Private consumption will be particularly weak.
  • An intensification of the euro area debt crisis is a downside risk to our forecast, as it could lead to a banking crisis and even the break-up of the euro.
  • We expect inflation to moderate to 2.7% in 2013 and 2.2% (average) in 2014-17.
  • We expect the current-account surplus to remain large but fall slightly by 2017.

  Review

  • According to an opinion poll in early February 2013, the government coalition has lost a significant share of support as its policies have attracted controversy.
  • The VVD and the PvdA remain the strongest parties, but their advantage over their main rivals, the right-wing Party for Freedom and the left-wing Socialist Party, has shrunk significantly compared with the September 2012 election.
  • The government has come to an agreement on a set of reforms aimed at ending the housing market downturn, primarily by incentivising home ownership (versus renting) and boosting the construction industry.
  • Real GDP contracted by 0.2% quarter on quarter (0.9% year on year) in the fourth quarter of 2012. Domestic demand remained exceptionally weak, whereas export performance was comparatively robust.
  • Consumer spending fell by 1% year on year in December 2012, after a 3% drop in November (the sharpest in three years). Moreover, consumer confidence fell in February 2013 to a new record low.
  • In January 2013 the unemployment rate (EU harmonised measure) rose to 6%, from 5.8% in December 2012 and 5% in January 2012.
  • Consumer price inflation (EU harmonised) fell slightly to 3.2% in January 2013, down from 3.4% in December 2012 (the highest rate in at least ten years).

  March 05, 2013

Economy:

• Background

  Netherlands: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	16.8	Population growth	0.5
  GDP (US$ bn; market exchange rate)	773.2	Real GDP growth	-0.1
  GDP (US$ bn; purchasing power parity)	722.9	Real domestic demand growth	-0.3
  GDP per head (US$; market exchange rate)	46,052	Inflation	1.9
  GDP per head (US$; purchasing power parity)	43,056	Current-account balance (% of GDP)	7.2
  Exchange rate (av) €:US$	0.78	FDI inflows (% of GDP)	1.7
  a Actual.

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  Background: The Netherlands has been a constitutional monarchy since 1848. From the early 20th century onwards, a party system developed based on segmented confessional and ideological backgrounds. After the second world war, full employment and the discovery of gas resources helped the Netherlands to build an extensive welfare system (since pared back) and colonies were granted independence. The Netherlands was a founder member of the European Community and its successor, the EU, although its 2005 vote against the EU constitutional treaty revealed a degree of Euroscepticism.

  Political structure: The Netherlands has a two-tier parliament, the Staten Generaal. The First Chamber (or Senate) of 75 members is elected by the provincial councils every four years and has powers to accept or reject legislation. The Second Chamber of 150 members is elected by proportional representation every four years and is the primary lawmaking body. Following a general election in September 2012, a centrist "grand coalition" government took office in November 2012.

  Policy issues: The government is focusing on fiscal consolidation, including a mixture of tax increases and spending cuts. The bulk of savings will be made through cuts in spending on healthcare and social security (especially unemployment benefit). Euroscepticism in the electorate will complicate the Netherlands' contribution to resolving the euro area debt crisis. The strength of far-right parties underlines concerns about immigration and integration. The government's involvement in the financial sector, highlighted by the nationalisation of lender SNS Reaal in early 2013, remains contentious.

  Taxation: The main corporation-tax rate is 25%, and a lower rate of 20% exists for the first EUR200,000 of profits, mainly benefiting small and medium-sized enterprises (SMEs). The Corporation Tax Act provides for a participation exemption, preventing double taxation when the profits of a subsidiary are distributed to its parent firm abroad. Withholding tax levied abroad may generally be offset against income or corporation tax payable by the taxpayer in the Netherlands. The basic rate of value-added tax (VAT) is 21%, with a lower rate for essential goods such as food and medicines at 6%.

  Foreign trade: In 2011, with merchandise exports at US$550bn and imports at US$485bn, the Netherlands recorded a trade surplus of US$65bn. The current-account surplus was US$81bn (9.7% of GDP).

  Main exports fob 2011	% of total	Main imports cif 2011	% of total
  Machinery & transport equipment	27.6	Machinery & transport equipment	28.4
  Manufactured goods	18.3	Mineral fuels, lubricants etc	21.7
  Chemicals	17.5	Manufactured goods	21.2
  Mineral fuels, lubricants etc	16.1	Chemicals	12.9
  Food & live animals	11.9	Food & live animals	8.8
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Germany	24.1	Germany	16.7
  Belgium	12.1	Belgium	10.0
  France	8.9	China	8.4
  UK	8.0	Italy	4.8
  EU	74.6	EU	53.3

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  March 05, 2013

• Structure

  Netherlands: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 05, 2013

• Outlook

  Netherlands: Country outlook

  Netherlands: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: On November 5th 2012, a "grand coalition" government of the centre-right Liberals (VVD) and the centre-left Labour Party (PvdA) was officially sworn in. The government formation agreement came less than two months after the snap general election on September 12th, making this one of the fastest government formation processes in recent Dutch history. The pace at which the party leaders, Mark Rutte (VVD) and Diederik Samsom (PvdA), found compromise on major divisive issues (see below) indicates that they wanted to send a message of political unity and decisiveness after ten years of political instability (with five elections) since 2002. Until recently, the political landscape had been at a risk of fragmentation, with the centre squeezed by populist right-wing and left-wing forces. The unstable minority government that preceded the VVD-PvdA coalition highlighted the risk of increasingly ineffective government. The 2012 election marked a victory for the political centre, perhaps indicating the electorate's wish for greater stability.

  ELECTION WATCH: The next scheduled municipal elections will be held in March 2014. A European Parliament election is due in 2014 and provincial elections (to the First Chamber) in May 2015. A Second Chamber election is not due before 2016.

  INTERNATIONAL RELATIONS: The government is likely to remain committed to European integration, but rising Euroscepticism among the electorate will make the country a difficult participant in euro area rescue mechanisms. The euro zone sovereign debt crisis represents a grave threat to Dutch economic and financial stability, but support is low among the electorate for contributing taxpayers' money to bail-outs of euro area sovereigns or to emergency credit facilities. The continuing focus on fiscal consolidation domestically (see Fiscal policy) means that the Netherlands is likely to remain a key ally of Germany in prioritising fiscal austerity in the highly indebted peripheral euro zone countries as a precondition for further financial support. The coalition agreement also stresses the Netherlands' support for the gradual establishment of a European banking union.

  POLICY TRENDS: The VVD-PvdA government's policy programme focuses on deficit-narrowing. Structural reforms to boost medium-term growth and prepare the economy for population ageing are also envisaged. VVD-PvdA plans for pension reform would raise the official retirement age gradually from 65 currently to 66 by 2018 and 67 by 2021. Reform of financial services aims to make the system less dependent on state backing during crises. A banking sector levy, to prefund the deposit guarantee scheme, is a central element of this policy. In January 2013, the government nationalised the country's fourth-largest bank, SNS Reaal, at a cost of EUR3.7bn to Dutch taxpayers. Another state-owned bank, ABN Amro, will not be privatised until financial market stability has returned. ING, another financial institution, is gradually repaying the bail-out it received from the state in 2008.

  ECONOMIC GROWTH: The Economist Intelligence Unit expects another contraction in real GDP in 2013, of 0.6%, after a drop of 0.9% in 2012, particularly in light of sluggish domestic demand. A meagre recovery in domestic demand and a stronger one in foreign demand should contribute to real GDP growth of 1.4% in 2014-17. An intensification of the euro area debt crisis is a downside risk to our forecast, as it could lead to a banking crisis and even the break-up of the euro area.

  INFLATION: We expect EU harmonised inflation to fall only slightly from 2.8% in 2012 to 2.7% in 2013, well above the euro area averages (2.4% and 1.9%, respectively). The rate should then moderate to an average of 2.2% in 2014-17.

  EXCHANGE RATES: The euro has strengthened since mid-2012 as the debt crisis in the single currency zone has eased and as global risk tolerance has increased. The euro reached US$1.37:EUR1 in late January before retreating to US$1.33:EUR1 in mid-February. The euro's appreciation will be capped by continuing weakness in euro zone economies, as well as stronger growth in the US. We expect the exchange rate to average US$1.33:EUR1 in 2013 and US$1.28:EUR1 in 2014-17, although there is a significant risk of sharp movements either way. Over the medium term the possibility of a break-up of the euro zone cannot be dismissed.

  EXTERNAL SECTOR: We expect the Netherlands to continue to record large current-account surpluses during 2013-17, following an estimated surplus of around 9% of GDP in 2012. The current account will still benefit from structural surpluses on the merchandise trade, services and income accounts. The current transfers account will remain in deficit.

  March 11, 2013

• Forecast

  Netherlands: Country forecast summary

  Country forecast overview: Highlights

  • The pro-business Liberals (VVD) and centre-left Labour Party (PvdA) formed a "grand coalition" government after the September 2012 general election. At the election, voters returned to the political centre, boosting political stability. However, the coalition's first few months in office have revealed a less effective government than many voters may have anticipated. The Economist Intelligence Unit nonetheless expects the coalition to survive its full term to 2016.
  • The new government's budgetary strategy focuses on fiscal consolidation, with a mixture of spending cuts and tax increases. However, a weak economy and/or government divisions could cause delays in achieving budget balance. We expect the general government deficit to narrow to 2.4% of GDP by 2017, from an estimated 3.8% of GDP in 2012. Public debt is expected to rise from an estimated 72.1% of GDP in 2012 to just above 77.4% by 2017, peaking at 78.2% in 2015.
  • The euro area debt crisis remains a challenge. The Netherlands is expected to continue to back the German-led approach to the crisis, calling for tough oversight of euro area members with weak public finances. However, this stance may weaken, especially if the Netherlands' own public finances remain under pressure. Moreover, reluctance to support further bail-outs of weaker states is growing. Measures to boost governments' and banks' liquidity have helped to restore a degree of market confidence, but concerns persist about the EU's financial system and the potential break-up of the euro.
  • The European Central Bank (ECB) is likely to keep its policy rate unchanged in 2013; it last reduced it to 0.75% in July 2012. However, it could still cut it further if an expected pick-up in growth fails to materialise by mid-2013. It will also continue its liquidity provision to banks, and is ready to restart its sovereign bond buying programme to support financial and economic stability.
  • We expect another real GDP contraction in 2013, of 0.6%, after a drop of 0.9% in 2012. We forecast sluggish average growth in 2014-17, of 1.4%, driven especially by relatively robust export growth. However, private consumption is set to remain particularly weak. A deterioration of the euro area debt crisis could dampen the recovery significantly. Meanwhile, inflation is set to moderate to 2.7% in 2013 and 2.2% on average in 2014-17, from 2.8% in 2012.
  • We forecast that the euro will average US$1.33:EUR1 in 2013 and US$1.28:EUR1 in 2014-17, but sharp movements in either direction remain a significant risk. The Netherlands' current-account surplus is forecast to shrink to 6.8% of GDP by 2017.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	-0.9	-0.6	0.8	1.4	1.7	1.6
  Consumer price inflation (av, %; EU harmonised measure)	2.8	2.7	1.8	2.6	2.1	2.2
  Budget balance (% of GDP)	-3.8	-3.7	-3.6	-3.3	-2.9	-2.4
  Current-account balance (% of GDP)	9.0	8.3	7.6	7.2	7.2	6.8
  Short-term interest rate (av; %)	0.6	0.3	0.6	1.1	1.8	1.8
  Exchange rate US$:€ (av)	1.29	1.33	1.31	1.27	1.26	1.26
  Exchange rate ¥:€ (av)	102.9	123.4	124.0	122.2	122.9	121.7

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  March 05, 2013

View detailed map

Country Briefing

Total area

41,526 sq km (including inland waters): 57.9% cultivated land, 7.6% forest, 7.5% built-up, 17.4% water, 3.5% nature reserve, 6.1% other

Population

16.8m (November 2012)

Main towns

Population in '000, end-December 2011:

 Amsterdam (joint capital): 790

 Rotterdam: 616

 The Hague (joint capital): 502

 Utrecht: 316

 Eindhoven: 217

 Tilburg: 208

Climate

Temperate European continental climate subject to oceanic influences

Weather in Amsterdam (altitude 3 metres)

Hottest month, July, 13-22°C (average daily minimum and maximum); coldest month, January, 1-5°C; driest month, March, 45 mm average rainfall; wettest month, August, 85 mm average rainfall

Language

Dutch

Measures

Metric system

Currency

Euro (€) = 100 cents

Time

One hour ahead of GMT, two hours ahead in the summer

Public holidays

New Year's Day (January 1st), Good Friday (March 29th), Easter Monday (April 1st), Queen's Day (April 30th), Ascension Day (May 9th), Whit Monday (May 20th), Christmas Day (December 25th), Boxing Day (December 26th)

January 11, 2013