Dutch Voters Strike a Blow Against Populism

17 March 2017

Jon Chitty

Dutch voters strike a blow against populism

At the core of any populist ideology is a belief that society is run by elites for their own benefit, and to the detriment of the common man. In the narrative constructed by Partij voor Vrijheid (PVV – party for freedom) leader Geert Wilders, the European Union represents the interests of the elite whilst subjugating the needs of ‘Henk and Ingrid’ – his version of the common people of The Netherlands. As a result of numerous death threats made by Islamic extremists, Wilders is forced to live under 24 hour armed protection. His isolated world view is coloured by the idea that immigration from Islamic countries is creating a parallel society within The Netherlands whose values are incompatible with the Judeo-Christian values of Henk and Ingrid. For a while it seemed as if Wilders’ brand of us-versus-them, antagonistic populism was capturing the public mood in The Netherlands, and like the UK (Brexit) and the US (Trump) many feared that nationalist sentiment would come out on top in Wednesday’s general election.

Europe breathes a sigh of relief

To the relief of liberals and Europhiles everywhere it became apparent on Thursday morning that current prime minister Mark Rutte’s Volkspartij voor Virjheid en Democratie (VDD – people’s party for Freedom and Democracy) had taken the most seats in parliament, and if Mr Rutte’s comments in the run-up to the election are anything to go by, there is a ‘zero percent’ chance of the PVV being involved in these talks. Parliament is fragmented so forming a stable government will still be a not insubstantial task, and the PVV’s representation has risen (though not above levels achieved in the 2010 election), but when compared to the worst-case scenario we are clearly in a better place. Markets breathed a sigh of relief in the wake of the result, and though we do not want to read too far into the event there may be some comfort for those concerned about the prospect of a victory for Marine Le Pen’s right wing Front Nacional in the upcoming French elections.

Bank of England holds rate, but the decision is no longer unanimous

It was entirely unsurprising to see the Bank of England (BoE) hold headline rates at 0.25% this Thursday, but the fact that we now have a dissenting member of the Monetary Policy Committee calling for a hike may be indicative of a change in sentiment. Kristin Forbes’ call to raise rates by 0.25% could be viewed as no more than aprotest vote (she is due to step down from the MPC in the summer), however when coupled with the more ‘hawkish’ language used in the minutes of the meeting it suggests something of an inflection point. The UK economy has defied expectations post-Brexit, and under conditions of low unemployment and rising inflation central bankers would typically look to raise rates. Arguments made in the most recent BoE inflation report for increasing growth expectations whilst leaving inflation forecasts untouched centred on a decline in the ‘natural’ rate of unemployment in the UK economy, and needless to say this view was met with scepticism. The output from the March 15th meeting implies that any signs of wage inflation could persuade the MPC to consider raising rates, and whilst it is not our base-case it is a possibility we have been open to for some time. All else equal a higher probability of rate rises is a positive for the pound, and we saw a sharp rally after the news was released.

Scottish referendum on independence ruled out conclusively

Scottish politicians have been positioning to demand a second referendum on independence since the UK voted to leave the European Union (EU) last summer, and noise-levels in Holyrood have been increasing in recent days. The majority of Scottish voters were against leaving the EU, and as a result the Scottish National Party (SNP) feels it is democratically legitimate to demand a legally binding referendum before spring 2019 – the point at which the UK should officially leave the EU. Arranging the terms on which the UK leaves the EU are expected to be the most significant peacetime negotiations in British history, and for Theresa May the idea of fighting on two fronts is clearly untenable. Perhaps this is why the prime minister has stated that any attempt at organising a referendum on Scottish independence would be rejected conclusively. Westminster is well within its rights to refuse to allow a legally binding vote, however the feeling in the Scottish parliament that a vote is justified by the will of the people may cause a stand-off in the near future.

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