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The first of a series of elections shaping Europe’s prospects takes place in the Netherlands on March 15 when Dutch voters will elect a new 150-member parliament.
The uncertainty attached to the outcome has led the Netherlands to slip a little in Euromoney’s global risk rankings, highlighting a small political risk premium.
But the fall in risk score is unremarkable and the borrower remains the sixth-safest country in the world in which to invest:
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Country risk experts do not attach a particularly high probability to political turmoil developing, including the possibility of a referendum on EU membership.
The Netherlands has a higher score for political risk than Germany, Austria, the UK and other comparator nations.
That seems hard to fathom, perhaps, given the recent resignation of the justice minister, Ard Van de Steur, in connection with a prosecution settlement made years ago with a drugs baron.
The issue has dealt a blow to the popularity of prime minister Mark Rutte’s party, VVD, which had taken the lead in the opinion polls.
That has put the Party for Freedom (PVV) back in front. Geert Wilders, its populist leader, is seeking to clamp down on immigration and would attempt to force a referendum on the EU if he were to gain power.
But even if PVV wins, the possibility of it forming a government has been largely ruled out by the mainstream parties preferring to go into coalition together rather than entertain the populist right.
Indeed, although risk factor scores for institutional risk, and the regulatory and policy environment, have fallen slightly, the score for government stability has improved, signalling little prospect of a major political shift.
Theo de Cort of Dutch bank ABN Amro, which takes part in ECR’s survey, echoes the opinions of others. He says: “A five-party government led by PM Rutte’s VVD is the most likely after the elections.
“In our analysis, we have assumed a stable government needs at least 80 seats and that the PVV cannot be part of the new government as insufficient other parties are willing to work with them.”
De Cort says that means there are only two possible coalitions, both comprising VVD, CDA, D66 and Groenlinks together with a fifth party – either the Labour Party, PvdA, or 50PLUS, a party representing pensioners’ interests.
A larger coalition would make policymaking unwieldy and the government vulnerable to fragmentation, but the Netherlands has had snap elections before without too much fuss, and the bigger picture is one of improving economic fundamentals and fiscal strengths.
The latest MJEconomics Euro Zone Barometer (a monthly survey of independent forecasts) outlines GDP growth of 1.7% for 2017, with the unemployment rate falling to 5.3%.
The general government deficit is expected to narrow further to 0.7% of GDP, lowering the gross sovereign debt burden to 61% of GDP.
Four of the five Dutch economic indicators improved last year, along with three out of four structural risk indicators, and with an exemplary score for capital access, the Netherlands isn’t about to lose its triple-A credit ratings in the near future.