Risk of Netherland’s exit seems low post the elections, formation of PVV government remains far-fetched: Danske Bank

The far-right Freedom Party (PVV) led by Geert Wilders is likely to become the largest faction in the lower house after the parliamentary elections on 15 March, while established parties from the governing coalition will probably see their support dwindle.

The PVV is unlikely to be able to form a government, since other parties have ruled out forming a governing coalition with it. Instead, a lengthy coalition building process will start, with the new government likely to consist of a coalition of at least five centre-right and centre-left parties, Danske Bank reported.

Even if the PVV were somehow able to gain sufficient seats to form a government, it would still be very difficult to hold a referendum on EU membership. Referenda in the Netherlands are only advisory and without changes to current legislation a binding referendum on an EU exit cannot be held.

The election will be held under a proportional voting system, meaning that the number of seats parties obtain will be broadly equal to the number of votes they receive. The PVV is projected to receive only around 33 seats in parliament according to recent polls, leaving it way short of the 76 needed for an absolute majority to govern. Political isolation is hence the major obstacle to the PVV taking part in a future government as other parties have ruled out forming a governing coalition with it.

"Although the probability of a PVV government is low in our view, investor sentiment is unlikely to remain complacent as some risk premium should be included when the election date draws nearer," the report said.