E.O. 12958: N/A

Ref: (A) The Hague 109, (B) The Hague 114

THE HAGUE 00000122 001.2 OF 002

1. Summary: Following the withdrawal of the Labor Party (PvdA) from the Dutch coalition government on February 20, Queen Beatrix asked the remaining coalition members to form a caretaker government to "handle ongoing business" and prepare for elections on June 9. The caretaker government consists of the remaining two members of the coalition: the Christian Democrats (CDA - Prime Minister Balkenende's party) and the Christian Union (CU). The expectation
is that the formation of a new government after the elections will take at least several months. Until that happens, the caretaker government is to stay clear of controversial issues, including most aspects of the Netherlands' involvement in Afghanistan. End summary.

2. On February 24, Queen Beatrix accepted the resignation of all
PvdA ministers and state secretaries. She also asked the caretaker
government of CDA and CU to prepare for parliamentary elections on
June 9 and "do all that it deems necessary in the interest of the
Kingdom" (ref A). Prime Minister Balkenende subsequently announced
a number of internal cabinet reshuffles to fill some of the 12
portfolios vacated by PvdA, but no new persons were appointed to
cabinet positions from outside the cabinet. The reshuffles

- Foreign Minister Mr. Maxime Verhagen (CDA) has taken over the
portfolios of the Minister for Development Cooperation and the
Minister for European Affairs (both of which are already housed
within MFA).

- Justice Minister Mr. Ernst Hirsch Ballin (CDA) is now also
managing the Ministry of Home Affairs and Kingdom Relations (the
equivalent to the U.S. Department of the Interior).

- Defense Minister Mr. Eimert van Middelkoop (CU) is now also
managing the portfolio of the Minister of Housing, Neighborhoods,
and Integration. [Note: This is a portfolio - the key element of
which is integration/minority issues - within the larger Ministry of
Housing, Spatial Planning and the Environment. End note.]

- Minister for Youth and Family Affairs Mr. Andre Rouvoet (CU) is
now also managing the Ministry of Education, Culture, and Science.

- State Secretary for Finance Mr. Kees Jan De Jager (CDA) is now
Minister of Finance.

- State Secretary for Transport Ms. Tineke Huizinga (CU) is now
Minister of Housing, Spatial Planning and the Environment.

3. Parliament must now develop a list of "controversial" issues upon
which it will not act until a new coalition government is formed - a
procedure that considerably restricts the interim cabinet's ability
to act. Prime Minister Balkenende is expected to argue that some
issues, though controversial, "cannot bear delay" and must be
addressed by the caretaker government. However, he has acknowledged
that his cabinet must observe restraint, adding that "we can't go
further than parliament permits us to do." For each issue that PM
Balkenende argues "cannot bear delay," parliament will decide on an
ad hoc basis whether to take action. We expect parliament to
finalize its list of contentious issues by mid-March. At that
point, we will have more clarity on what decisions the caretaker
government will be able to make.

4. While some aspects of the Afghanistan decision, as well as the
planned procurement of a second Joint Strike Fighter test plane,
likely will be put off until after the new coalition government is
formed, other Afghanistan decisions could possibly be decided
Qformed, other Afghanistan decisions could possibly be decided
earlier (ref B). It is important to note that, while most decisions
about the Dutch role in Afghanistan rest with the executive branch
and do not require legislation, the cabinet will not act
unilaterally without support from a majority in parliament.

5. Meanwhile, the Dutch are scheduled to elect new local/municipal
councils on March 3. These elections will proceed as planned; they
will have limited bearing on the June 9 national elections. At
most, poor results in the local elections may persuade parties to
rethink strategies and make personnel changes.

6. Comment: The general expectation is that the June 9 general
elections will result in the fragmentation of the political spectrum
into a dozen small- and medium-sized parties, with no large parties.
This sets the stage for a complicated and possibly lengthy process
(at least several months) to form a new coalition government. Until
then, the caretaker government will have very limited powers and
must defer to parliament for permission to act on any divisive
issue. This does not mean that the work of the Dutch government

THE HAGUE 00000122 002.2 OF 002

will grind to a halt; we expect the caretaker government to "handle
ongoing business," including making decisions on non-controversial
issues, participating in international fora, and engaging
bilaterally with us. However, we cannot expect the caretaker
government to make any significant policy shifts, launch major new
initiatives, or act on contentious issues. End comment.