Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Far-right leader Geert Wilders’ attempt to form a government in the Netherlands suffered a setback on Friday as business warned that political instability would deter investors.
Dilan Yeşilgöz, leader of the right-wing liberal VVD party, said she would not form a coalition with Wilders. However, the outgoing justice minister said she could support a centre-right cabinet from outside, without clarifying whether Wilders’ Islamophobic Freedom Party could be defined as centre-right.
Wilders said the news was “very disappointing” but added that a “ray of hope” was his belief that she would support him in some parliamentary votes. His Freedom Party came first in Wednesday’s general election, but to form a majority in the lower house he needs the support of at least two other parties.
The fourth largest party, the center-right New Social Contract, has yet to decide whether to start talks with him. Its leader, Pieter Omtzigt, said he had a responsibility to form a government but Wilders must abandon unconstitutional measures such as banning the Koran and mosques.
Business groups warned that ongoing political instability had weakened the country’s attractiveness to investors.
“More and more companies are thinking about moving their headquarters to another jurisdiction,” Ingrid Thijssen, president of employers’ association VNO-NCW, told the Financial Times. “The main reason for the damage to the business and investment climate is the instability in the way our country is governed.”
Thijssen said the coalition governments led by Mark Rutte over the past 13 years had failed to solve problems such as the huge housing shortage and the large influx of immigrants. This resulted in 23 percent of voters choosing Wilders’ party.
The Netherlands is one of the richest members of the EU and is heavily dependent on international trade. Thijssen said she feared her country was becoming “very inward-looking.”
“Around 34 percent of our GDP comes from business abroad. So we are a very open economy. One in three jobs depends on it.”
The country suffered a double blow when consumer goods giant Unilever and oil and gas major Royal Dutch Shell shifted their tax bases to the UK in 2020 and 2021, respectively.
ASML, the semiconductor equipment maker and the country’s most valuable company, has criticized plans to reduce the number of skilled immigrants and students. “Any restriction on the number of knowledge workers or international students relevant to our industry is undesirable,” said spokeswoman Monique Mols.
She also criticized a recent vote in Parliament to cut tax breaks for expatriate executives.
Wilders wants to reduce immigration and shift the tax burden from poorer people to richer people to appeal to his voters.
However, Ben Verwaayen, the former boss of telecoms equipment maker Alcatel-Lucent, told the FT that the Netherlands remains a good place to hire despite a reduction in the law that exempts 30 percent of top earners’ income from tax.
“It does not help. No. Is it the end of the world? No. It is still a package that can compete globally,” he said.
He also said promises made during the campaign were not always implemented. “There’s a lot [of difference] between emotions in politics and implementation at the end of the day.”
Ratings agency DBRS Morningstar maintained a triple-A rating on Dutch debt, saying it is a highly productive and competitive economy with moderate public debt and a strong external position.
However, Yesenn El-Radhi, a vice president, said the new government was likely to be Eurosceptic and would create “political uncertainty.” . . particularly with regard to foreign policy, climate policy and immigration.”
Recommended
Analysts at ABN Amro Bank expected a government including Wilders to run a budget deficit of about 3 percent of GDP.
“One of the few concrete measures the Freedom Party championed during the election campaign was additional spending on health care,” analysts said in a research note.
Abolishing mandatory health insurance contributions would cost 4.5 billion euros per year and free public transport for older people would cost around 800 million euros.
Other measures include a higher minimum wage – which would also increase state pensions and reduce fuel taxes. “How these measures should be financed remains an open question. . . unclear,” the bench said.