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Dutch finance minister flies home to discuss austerity measures after collapse of budget talks

AMSTERDAM – The Dutch finance minister flew home early Sunday from International Monetary Fund meetings to discuss the future of austerity measures torpedoed by euro-skeptic lawmakers and to reassure ratings agencies that he wants to put his country’s budget back on track.

Jan Kees de Jager arrived home a day after anti-EU lawmaker Geert Wilders walked out of austerity talks with the ruling minority coalition, saying he would not cave in to budget demands from “dictators in Brussels” to bring the Dutch deficit back within the EU limit of 3 per cent of GDP.

De Jager said he still plans to submit a 2013 budget to the European Union by April 30, despite expectations that the Dutch government will resign in coming days and call elections later this year, making it the latest European government forced out of office by the continent’s financial crisis.

De Jager told Dutch newspaper De Telegraaf that the AAA-rated Netherlands has a reputation for fiscal prudence and discipline and he wants to keep it that way. De Jager said he is repeating that message “to everyone, including the ratings bureaus.”

With the failure of the talks, chances of the Dutch deficit falling below 3 per cent in 2013 have receded dramatically.

That’s a bitter pill for De Jager and Prime Minister Mark Rutte, who have been vocal critics of nations that failed to adhere to the 3 per cent rule.

The Dutch economy is in recession and the government is expected to run a 4.6 per cent deficit this year — better than Spain’s, but worse than Italy’s.

With socialist candidate Francois Hollande leading polls ahead of France’s presidential vote Sunday, Germany’s Angela Merkel looks increasingly isolated as Europe’s flag-bearer for the imposition of immediate austerity measures.

Last week, ratings agency Fitch warned the Netherlands that it risked a downgrade of its coveted AAA status depending on the outcome of the austerity talks between the two governing parties and Wilders. The country’s central bank president warned last week that borrowing rates for the Netherlands could rise as much as one per cent if the credit rating is cut.

Lawmakers will meet early this week and Rutte will have to begin working with leftist opposition parties to stake out budget cuts both sides of the political spectrum agree on while the country is run by a caretaker administration.

It won’t be easy going, given that Rutte has ruled since 2010 with an all-conservative coalition holding a one-vote majority in parliament, often riding roughshod over the opinions of the left.

Still there may be some room to manoeuvr: many parties — with the notable exception of Rutte’s Liberals — would like to see reforms to the country’s generous tax deductions on mortgages, which have led to the Dutch holding some of the highest personal debt levels in Europe.

Cuts in pension and health care benefits — the two largest sources of government spending — seem inevitable, but enthusiasm for actually enacting them may prove limited with a fall election looming. Foreign aid and defence spending will also likely be in the firing line.

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Associated Press writers Mike Corder in The Hague and Raf Casert in Brussels contributed.