The Netherlands has called an election for September 12, leaving the country open to months of political and economic uncertainty after the government collapsed in a row over budget cuts that are needed to meet strict EU limits. The euro zone's fifth-largest economy has been one of its most stable but plunged into political crisis on Monday, when the government lost the support of its main ally, becoming a victim of growing resistance to EU-imposed austerity. Financial markets have been unsettled by the inability of one of Europe's few AAA-rated countries to agree on the same deficit-cutting they have demanded of others. Dutch bonds fell sharply on Monday but have since rallied with investors saying the economy still looks quite strong. The outgoing government now has less than a week to win opposition support for a savings package it must present to the European Commission. Prime Minister Mark Rutte will send his latest budget plan to parliament later on Wednesday. “If the parties manage to agree on a sufficient number of measures, bond markets will receive this positively,” Walter Leering, fixed income analyst at Dutch private bank Theodoor Gilissen said in a note. “If not, and the country is in a vacuum until elections, the pressure on interest rates and the AAA rating will probably increase again.” The largest opposition parties have refused to back Rutte's 14 to 16 billion euro package of cuts, with many saying meeting the EU's target of 3 percent of gross domestic product would lead to economic misery. Europe's politicians are facing a wave of resistance to austerity that some economists say is necessary to solve a debt crisis that has seen Greece, Ireland and Portugal seeking outside financial aid. The International Monetary Fund has cautioned Europe against cutting spending too far and too fast at the expense of restarting economic growth. The Dutch political crisis comes as French voters seem poised to chose economic growth over austerity by voting for Socialist presidential candidate Francois Hollande over conservative President Nicolas Sarkozy on May 6. Asked about the Dutch problems, European Central Bank President Mario Draghi said on Wednesday the euro area “must continue to be a credible area of price stability, fiscal stability and growth.” The Netherlands is one of the euro zone's most fiscally conservative members and the government has been critical of the region's “budget sinners”, the countries struggling to bring down their deficits. All ten parties in parliament are broadly supportive of budget cuts but not to the extent needed to reach the EU limit. Rutte, who will stay in place until the elections, is hoping to push his plans through the 150-seat parliament on Thursday with the help of small opposition groups. His Liberal Party has 31 seats and his coalition partner has 21 seats.
