PM Rutte staves off Wilders challenge in Dutch elections

Prime Minister Mark Rutte’s liberal party has comfortably repelled the challenge of Geert Wilders’ far right Freedom Party to come out on top in the Dutch general election, in a key measure of support for establishment parties in Europe.

Incumbent Rutte’s centre-right VVD party was assured of 33 members of parliament with over 95% of votes counted, with no major changes expected in the remaining constituencies. This was down from its current 41 seats.

That figure puts his party into a clear lead ahead of Wilders’ PVV, which though it increased its representation to 20 seats had led polls just weeks before Wednesday’s election.

The Christian Democrats and Liberal D66 are currently locked in third position on 19 seats each, just behind the PVV, and ahead of with the newly emergent GreenLeft party as it jumped to 14 from 4 seats.

Dutch centrist politicians still face a sizeable challenge face, as a difficult and possibly lengthy process to form a coalition lies ahead.

Given the number of seats won, it is very likely that Mark Rutte will continue his role as Prime Minister, and while he will have options to form a coalition that excludes the PVV from government, he will have to form a coalition with at least three other parties.

Wilders’ party’s rise to become the second largest party in the Netherlands has mirrored the rise of right-wing parties in the UK and the US following key votes in 2016, as well as a bubbling of anti-establishment, 'populist' parties in continental Europe, represented by the mainstream emergence of Marine Le Pen’s National Front party in France from the shadowy past under her father.

France will go to the polls later this year in another key indicator of European attitudes towards the EU following the successful Brexit campaign in the UK last year. Germany also faces a significant election in which Angela Merkel’s ruling Christian Democrats likely to haemorrhage votes to euro-sceptics Alternative for Germany.

"Our message to the Netherlands – that we will hold our course, and keep this country safe, stable and prosperous, got through." Mark Rutte

Rutte appeared at his party’s election night celebration to proclaim victory in a race which was thought to have been much closer than it turned out on the day.

“Our message to the Netherlands – that we will hold our course, and keep this country safe, stable and prosperous, got through,” Rutte told the cheering masses late on Wednesday.

For now, markets – and pro-Europeans – will at least enjoy some comfort from these results, said analyst Bas van Geffen at Rabobank, as the result lends hope that the French and German electorates will not fall to populist sentiment either.

"However, we caution that pollsters have concluded that a large majority of VVD voters ultimately decided in favour of the party – at least partly – because of the economic conditions. With the French economy still lagging the Dutch, French voters may still be wooed by populist promises."

Economists at Berenberg said that although much political uncertainty throughout Europe is still reverberating around Europe, for the time being they felt voters were still likely to opt for the status quo.

“Although the Dutch result does not in itself reduce the tail risk of a victory for Marine Le Pen in France or potentially Beppe Grillo in Italy very much‎, it presents an opportunity to restate our base case: While political risks are more serious than ever before in the Eurozone, the probability that they will actually materialise remains low,” affirmed Berenberg’s Holder Schmieding.

With around 5% of the votes still to come in the Netherlands, Rutte’s party will now look to the unenviable task of forming a coalition within a highly fractured Dutch parliament, with less seats than it had before the election.

The EUR/USD rallied on the combination of Dutch election results and the US Federal Reserve rate hike announcement.