The rebellion against austerity measures in the Euro Area has spread from the troubled countries such as Greece, Spain and Italy to the Netherlands. The Netherlands, a close ally of Germany and has been a staunch supporter of austerity. But the economy has been faltering and opposition to provisions of the new austerity budget has been rising, particularly within the anti Euro, right wing Freedom Party. The issue came to a head over the last weekend when the Freedom Party walked out of the budget talks. Prime Minister Mark Rutte submitted his resignation to the Queen but was requested to form a caretaker government and negotiate a budget with the opposition.

Some indication of the mood of the Dutch people is indicated by the measures of confidence among consumers and business people that were published today. Confidence among manufacturers has deteriorated since the beginning of this year as can be seen in the first chart. Confidence is expressed as a percent balance. The overall measure of business confidence was -3.3% in April, indicating that there were 3.3% more business people who believed conditions were deteriorating than those who believed they were improving. One of the components of business confidence, Expected Activity declined from -5.8%in March to -6.1% in April and the Opinion on Order Books declined from -4.7% in March to -6.4% in April. The appraisal of inventories was the only positive, though a small one, 2.6%, in both March and April. A rise in inventories when the economy is slowing, is not, however, very reassuring.

Consumers perked up a bit in April, but their confidence is still close to their all time lows. Over the past five years consumers have been much more pessimistic than business people as can be seen in comparing the first and second charts. Like the business people the are not in a mood to welcome higher taxes and lower welfare grants willingly.