Video

#SaxoStrats
Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 02 March 2017 at 14:00 GMT

Why the Dutch won’t follow Britain’s path

Head of Macro Analysis / Saxo Bank
France
  • The established parties are foreseen to perform poorly in the Dutch election
  • Right-wing party PVV by Geert Wilders could become largest in parliament
  • Established parties ruled out to govern with PVV
  • Netherlands will not leave the Eurozone
Mark Rutte
Ready to jump into the driver's seat again: 
Dutch prime minister Mark Rutte (front). Photo: Shutterstock
 
By Christopher Dembik

Times are changing, also in the Netherlands. In the 1980s, the three parties usually in power (Christian Democratic Party CDA, Social Democratic Party PvdA, and Conservative Party VVD) obtained about 80% of the vote. According to the latest polls, during the March 15 election they will only get half of that, around 40%. 

Conversely, Geert Wilders' Party for Freedom (PVV), an anti-immigration and anti-euro platform, is leading in the polls and could get 28 of the parliament's 150 seats (compared with 12 now), while the outgoing prime minister Mark Rutte and his VVD are predicted to get 24 seats – down from 40.

This erosion of the power of the traditionally ruling parties is explained, as in many European countries, by four main factors:

  1. Secularization. In the mid-1960s, more than 67 per cent of the population said that they belonged to a church against less than 40 per cent nowadays (the decline was particularly pronounced for the Catholic Church and the Protestant Church); 
  2. Erosion of the middle class. This was already perceptible before the global financial crisis (the middle class represents 32% of the total population, as in France, compared with 40% in Denmark according to an ILO study of 2016); 
  3. Inequality. The share of total income held by the richest 1% is now close to its level at the end of the 1930s, at 8% against 6% in Denmark; 
  4. Immigration from Muslim countries causing tensions between citizenship and identity (according to an Ipsos survey published at the end of February, 80% of those questioned are concerned about immigration and 86% fear "a decline in the traditional values of Dutch society "). 

Dutch polls must be interpreted with caution. Unlike France, where the vote in favour of the National Front is well-estimated, public opinion surveys in the Netherlands are deemed unreliable, which does not rule out a last-minute surprise. This does not automatically mean a higher-than- expected PVV score. Take a look here for an earlier Tradingfloor-article on the Dutch election.

Geert Wilders
Leading the polls, but probably not the government: 
Geert Wilders and his PVV. Photo: Shutterstock 

Governing the French way

Indeed, the socio-economic profile of those who will vote will have a decisive influence on electoral behaviour. In the Netherlands, the participation rate of the richest 20% is usually on average 84%, while for the poorest 20% it is around 65%. This differential is higher than the OECD average of 13 percentage points. Lower voter turnout of the most deprived, who are usually more receptive to anti-euro and anti-immigration policies, could lead to a higher share of votes for the establishment and vice versa. 

The most likely scenario after March’s election is a kind of Republican Front, as in France, which is an agreement of the large traditional parties to keep the radical right out of power (find here our article on the upcoming French election). That should prevent the PVV from forming a government or being part of a coalition. The latter was formally excluded by the outgoing prime minister after the disastrous 2010-12 experience during which PVV appeared as a demanding and unreliable partner. It is likely that a broad coalition around the three historic political parties, CDA, VVD and PvdA, along with the Christian Union, the Democrat Social Democrats 66 and the reformed SGP political party will be formed in the aftermath of the election.

Dutch Aex (orange) vs German Dax (grey) performance since 2011 (click to enlarge)
AexDax
Source: Saxo Bank
 
No Nexit ahead

Even if the PVV came to power and tried to impose its European agenda, there is no way a “Nexit” could happen. The current legislation simply does not allow for a referendum on the euro. The Consultative Referendum Act (2015) authorises a popular initiative referendum on new laws adopted by parliament, but not on existing treaties. In addition, such initiative would be unlikely to succeed given the massive support of the population for membership in the Eurozone (according to a recent NIPO NSP poll, 78% of respondents wish to remain in the euro area and only 22% want to exit). The only solution would be for parliament to propose a ballot on this issue, but the result of a consultative referendum would not be binding on the government. Moreover, in view of the latest attempts on the subject in 2016, no parliamentary majority appears to be able to carry on this topic.

— Edited by Clemens Bomsdorf

Christopher Dembik is an economist with Saxo Bank in Paris.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail