(VOVworld)-Europe’s public debt crisis is experiencing new difficulties in the wake of the presidential election in France. The situation is deteriorating. Dutch Prime Minister Mark Rutte resigned after crucial negotiations on the national budget collapsed over the weekend. Rutte’s departure darkens the cloud hanging over the Eurozone’s debt issue.

Dutch Prime Minister Mark Rutte (Photo:Internet)

The Netherlands will hold an early general election in September. The decision was made when Queen Beatrix of the Netherlands ordered the Dutch Parliament dissolved on Tuesday. On Friday, the government will formally announce the general election which has been tentatively scheduled for September 12^th.

The Dutch economy has been deteriorating since the middle of last year, causing unemployment to climb 6%. To meet EU requirements and avoid losing its triple-A credit rating, the Netherlands needs to cut its budget deficit by 9 billion Euros, equivalent to 1.5% of its GDP. But negotiations by the 3 major political parties on an austerity plan ended in failure. As a consequence, the coalition government remains unable to get the Parliament’s approval for a 16 billion Euro austerity package, which the Prime Minister believes is essential to prevent the budget deficit from increasing to 4.7% of the GDP, about 28 billion Euros, next year.

The bottleneck facing Rutte’s administration is that the coalition government does not have a majority in the Parliament. Without the support of the Party of Freedom, the plan to keep the budget deficit below 3% is unlikely to succeed. Next year’s budget deficit is predicted at 4.6% of GDP and the Netherlands needs to submit its budget plan to the EU by next Monday. Economists believe the collapse of the Dutch government will create a power vacuum in the middle of Europe’s economic challenges. The problem is not the public debt, which equals 66% of GDP, but the burden placed on many households by the collapse of the real estate market. Statistics show that private real estate debt accounts for 249% of GDP, the highest in the Eurozone.

Eurozone leaders are under additional pressure following the collapse of weaker economies like Portugal, Ireland, Italy, Greece, Spain, and now the Netherlands. The EU released an official statement on Tuesday which shows that the total debt of its 17 member countries has risen to 87.2% of GDP, a record level since the Euro was made the common currency in 1999. At the moment, many countries in the Euro zone are redoubling efforts to reduce their own budget deficits and contribute to the 386 million euro bailout package given to Greece, Ireland and Portugal. In the meantime, a crisis warning is sounding for the EU’s 3^rd and 4^th largest economies: Italy and Spain.

Currently, the Netherlands remains one of 3 Eurozone countries with a triple-A credit rating. But economists say that only Germany deserves this rating. To preserve its rating, the coalition government is seeking support from the opposition parties for its plan to slash the budget.

In Wednesday’s trading session in Asia, the euro exchange rate continued to slide, sounding new alarms for the EU.

Anh Huyen