Netherland: Be-wildering Dutch politics – Deutsche Bank

Robin Winkler, Strategist at Deutsche Bank, notes that beyond France and Italy, many investors also worry about a negative outcome from the Dutch election next spring, as the far-right and pro-‘Nexit’ Party for Freedom under Geert Wilders is currently projected to become the largest party.

Key Quotes

“Yet in our view the risks should not be exaggerated.”  

“First, Wilders won’t govern. Polls suggest his party will win the largest share of 30-35 parliamentary seats out of 150. Yet in the Netherlands’ highly fragmented party landscape, Wilders is extremely unlikely to find enough willing coalition partners to form a majority. All other parties have ruled out a coalition with Wilders’ PVV. Hence, although an electoral triumph for Wilders would be worrying for Europe, there is an even lower risk of a far-right party governing the Netherlands than of a far-right president governing France.”

“Second, more EU referendums are possible irrespective of Wilders and the election. Unlike in France, the far-right is not the only euro-skeptic force in the Netherlands. The more moderate euro-skeptic movement has coalesced around a demand for more sovereignty, rather than a concern over immigration. It was this movement that pushed for the new referendum law enacted last year and successfully piloted it over the ratification of the EU-Ukraine deal. Given that public initiatives only require 300,000 signatures to call a referendum, more antiEuropean referendums are possible in the coming years under any government.”

“Yet third, and crucially, Dutch referendums cannot jeopardize EU or Eurozone membership. The new referendum law severely limits the scope. First, consultative referendums can only delay but not abrogate legislation. This is easily forgotten because the Dutch government has (so far) opted to abide by the public vote against the EU-Ukraine Treaty. Yet it may not see itself bound by public opinion on matters that fundamentally affect European stability. Second, referendums can only be held concerning new legislation, such as the ratification of Ukraine deal. Existing legislation at the core of the Dutch EU membership is out of scope. In other words, there cannot be an “in or our” vote. Lastly, if a new coalition included parties such as the Christian Democrats—traditionally sceptical of direct democracy—the referendum law could be amended to exclude international treaties. We see this as more likely than the opposite campaign to make referendums binding.”

“The bottom line is that the Dutch election is not nearly as important a risk event as the Italian referendum or the French presidential election next spring. This is not to deny that the ongoing success of both Wilders’ PVV and other euro-skeptic movements bodes badly for the European Union in the long term. Yet it should be seen as a symptom of Europe’s wider legitimacy crisis, rather than as a localized risk that could make the entire edifice collapse.”