Europe’s Dutch Turning Point?

TILBURG – Last week, Dutch voters dealt a blow to far-right populism in their country’s general election. With the Euroskeptic, anti-immigration Party for Freedom (PVV), led by Geert Wilders, having managed to secure substantially fewer seats than anticipated, the Dutch outcome is a promising start to a year of critical elections in Europe.

The Netherlands will now be led by a moderate center-right coalition comprising the conservative-liberal People’s Party for Freedom and Democracy (VVD), the Christian Democratic Appeal (CDA), and the social-liberal Democrats 66 (D66). Smaller Christian parties – or, less likely, the leftist Greens – will probably round out the coalition. Mark Rutte, the VVD leader, is likely to remain as Prime Minister.

The affirmation of political moderation will be good for the Netherlands – and for Europe. The new Dutch government is likely to continue to pursue important structural reforms, including a long-overdue overhaul of the Netherlands’ convoluted tax system. The best approach to such reform may be to introduce a flat income-tax rate and to eliminate the complex tax-credit system, thereby making the system more transparent and efficient, while laying the groundwork for faster long-term economic growth.

Given the Netherlands’ large budget surplus, the new government will also be able to invest much more in both human and physical infrastructure – efforts that the coalition’s main parties have advocated. The authorities are also likely to continue advancing the country’s digital agenda, which the main ministries have been working to implement since its launch last August. Continued progress in this area, where the Netherlands is already a frontrunner in Europe, will boost growth in total factor productivity.