Dutch parties agree to make budget cuts

THE HAGUE - The two largest parties in the Netherlands, the Liberals VVD and Labor Party (Partij van de Arbeid), on Monday agreed to form a coalition and pass new austerity measures.

VVD leader Mark Rutte and PvdA leader Diederik Samsom jointly presented austerity plans worth 16 billion euros ($20 billion).

According to Rutte, the cuts were "necessary because the Netherlands still spends too much and economic growth is still structurally low".

Mark Rutte of the Liberals VVD and Diederik Samsom (L) of the Labor PvdA attend a news conference at The Hague, Oct 29, 2012. [Photo/Agencies]

The new cabinet will significantly cut in areas such as healthcare and social security, the VVD leader indicated, adding the measures would cost every citizen some 1,000 euros.

Samsom said the budget deal "represents the best of both worlds". "We can be proud of this, but there is no reason for joy. Everyone must make sacrifices in the coming years," he added.

Rutte admitted his party had to make compromises such as limiting the controversial mortgage interest tax deduction for both new and current mortgages and reducing the differences between low and high incomes.

Labor also had to make concessions such as the shortening of the duration of unemployment payment and cutting 1 billion euros in development aid.

Other agreements made included linking health premiums to income, scrapping health insurance benefits and merging of municipalities and provinces.

After Dutch elections on Sept 12, VVD (41 seats) and PvdA (38 seats) emerged as the biggest parties.

This year, a political agreement was reached in three weeks, a lot faster than the 127 days it took in 2010 for the VVD and the Christian Democrats, supported by the right-wing populist Party of Freedom.

A parliamentary debate on the new agreement will be held in the coming days during which Rutte will be formally appointed as prime minister for a second term.

VVD parliamentarian Jeanine Hennis is expected to become the first female minister of defense while 38-year-old Lodewijk Asscher, currently PvdA councilor in Amsterdam, is about to become vice prime minister.

The most likely dates for the new government to be presented to Queen Beatrix is Nov 8 or 9.