Dutch government collapses after economic talks fail

The Dutch government, one of the biggest critics of European countries failing to rein in their budgets, has resigned after disagreeing on a plan to bring its own deficit in line with EU rules.

Queen Beatrix accepted the resignation of prime minister Mark Rutte and his cabinet after a meeting in which he told her talks on a new austerity package had failed over the weekend.

Mr Rutte will address parliament on Tuesday to discuss interim measures to keep public finances in order and schedule new elections. No date for elections was immediately announced, but opposition MPs called for a vote as soon as possible.

The collapse came a day after the first round election victory of France's soft-on-austerity socialist candidate Francois Hollande. It calls into question whether austerity policies that are causing trauma in countries such as Greece, Spain and Portugal can be enforced even in "core" European countries such as France - or the Netherlands, one of the few along with Germany to maintain an AAA credit rating.

Mr Rutte's hopes to clinch a deal to cut the target below the EU's 3% target evaporated on Saturday, when his most important political ally, populist eurosceptic Geert Wilders walked out of the talks, saying a slavish adherence to European rules was foolish and would harm the Dutch economy.

That view is shared by some, such as the government's own Central Plan Bureau, and opposed by others, such as Dutch Central Bank President Klaas Knot.

Finance Minister Jan Kees de Jager insisted he still plans to submit an outline budget to Brussels by April 30, as mandated by European rules.

Opposition MPs say they are prepared to work with Mr Rutte to draw up a 2013 budget.

However, Diederik Samsom, leader of the opposition Labour Party, signalled he would not insist on bringing the Dutch deficit back in line with EU norms next year.

Although the Netherlands has relatively low levels of national debt, its economy is in recession and it is expected to post a deficit of 4.6% in 2012.