Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Far-right leader Geert Wilders’ attempt to form a government in the Netherlands suffered a setback on Friday, as the business community warned against political instability scaring off investors.
Dilan Yeşilgöz, leader of the right-leaning 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’ anti-Islam Freedom party could be defined as centre-right.
Wilders said the news was “very disappointing” but added a “bright spot” was his belief that she would support him in some parliamentary votes. His Freedom party came first in the parliamentary elections on Wednesday, but he needs the support of at least two other parties to form a majority in the lower house.
The fourth-largest party, the centre-right New Social Contract, has yet to decide whether to enter talks with him. Its leader, Pieter Omtzigt, has said he had a responsibility to try to form an administration but Wilders would have to drop unconstitutional policies such as banning the Koran and mosques.
Business groups warned that prolonged political instability had eroded the country’s appeal among investors.
“There are more and more companies thinking about changing their headquarters to another jurisdiction,” Ingrid Thijssen, president of the VNO-NCW employers’ organisation told the Financial Times. “The main reason that is damaging the business and investment climate is this instability around how our country is ruled.”
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 a big influx of immigrants. That led 23 per cent of voters to choose Wilders’ party.
The Netherlands is one of the EU’s richest members and is heavily reliant on international trade. Thijssen said she worried her country was becoming “very inward-looking”.
“Some 34 per cent of our [gross domestic product] comes from doing business abroad. So we are a very open economy. One in three jobs is dependent on that.”
The country sustained a double blow when Unilever, the consumer products group, and oil and gas company Royal Dutch Shell moved their tax bases to the UK in 2020 and 2021 respectively.
ASML, the semiconductor equipment maker that is the country’s most valuable company, has criticised plans to reduce the numbers of skilled immigrants and students. “Any restrictions on the amount of knowledge workers or international students relevant for our industry are undesirable,” said spokesperson Monique Mols.
She also criticised a recent vote in parliament to cut tax breaks for expatriate executives.
Wilders wants to slash immigration and shift the tax burden from poorer to richer people to appeal to his voters.
However, Ben Verwaayen, the former boss of telecoms equipment company Alcatel-Lucent, told the FT the Netherlands remained a good place to recruit despite a reduction in the law exempting 30 per cent 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 on the campaign trail were not always implemented. “There is a lot [of difference] between emotion in politics and the execution at the end of the day.”
DBRS Morningstar, the rating agency, maintained a triple A rating on Dutch debt, saying it was a highly productive and competitive economy with moderate government debt levels and a strong external position.
However, Yesenn El-Radhi, a vice-president, said the new government was likely to be Eurosceptic and would create “policy uncertainty . . . particularly with regard to foreign affairs, climate policies and immigration”.
Analysts at ABN Amro bank expected a government involving Wilders to run a budget deficit of about 3 per cent of GDP.
“One of the few concrete measures the Freedom party campaigned on was extra spending on healthcare,” analysts said in a research note.
Ending mandatory personal healthcare contributions would cost €4.5bn a year and free public transport for the elderly about €800mn.
Its other measures include a higher minimum wage — which would also increase state pensions and lower levies on fuel. “How to pay for these measures remains . . . unclear,” the bank said.
