Collapsed Dutch Budget Cut Talks Could Create Power Vacuum As Downgrade Looms

Collapsed budget talks in the Netherlands heralded months of political uncertainty ahead of early elections that now appear inevitable, shedding doubt on austerity programs and raising the prospect of a downgrade of the euro-zone country's top sovereign credit rating, Dow Jones reported. Dutch Prime Minister Mark Rutte will hold a cabinet meeting Monday to discuss ways to push forward budget cuts -- required to bring the deficit below the European Union limit of 3% of gross domestic product in 2013 -- and prepare the country for new elections after his government lost the support of right-wing ally Freedom Party, which opposed the reforms. Although the government vowed to proceed with the planned measures even after losing majority in parliament, support from the opposition isn't guaranteed. Uncertainty over the reforms could challenge the Netherlands' commitment to a newly minted fiscal compact among EU members that the country had fiercely advocated. Meanwhile, it could be months before fresh elections are held. The Dutch government's failure to agree to the deficit-slashing measures comes as market tensions have mounted in recent weeks over Spain's ability to control its own runaway deficits as the economy weakens, in a sign that the euro zone's sovereign debt problems may now be spreading to its core economies from the periphery. European Commission economics chief Olli Rehn Sunday said he "trusts" the Dutch government would continue to seek an appropriate solution to its budget debacle. Read more. (Subscription required.)