Longest-serving Dutch finance minister to step down

AMSTERDAM, Nov 27 (Reuters) Gerrit Zalm, the Netherlands' longest-serving finance minister, will leave politics and look for a job in business after a new government is formed following elections last week in which his VVD liberals performed poorly.

Zalm's office confirmed in a statement that the minister had made the announcement in a television programme yesterday.

His free-market VVD's poor standing in the general election means the party is unlikely to be able to continue their coalition with the Christian Democrats (CDA), which is likely to first negotiate with the opposition Labour and other smaller parties.

Zalm's office said the man who led the Dutch treasury for 12 years saw the most important elements of his legacy as rules he introduced in 1994 to separate government revenue from expenditure, the reduction of state debt and the achievement of a budget surplus.

He also noted the tough welfare reforms he helped introduce during his last term in office in a coalition government with Prime Minister Jan Peter Balkenende's CDA.

Zalm, 54, was one of the architects of unpopular moves to tighten Dutch early retirement, unemployment and work disability benefits -- intended to boost labour participation and make the economy more competitive as the population ages.

Zalm built a reputation in Europe as a fiscal hardliner and defender of the budget rules designed to protect the euro, often clashing with Germany and France over their persistent deficits.

The Financial Times called Zalm ''the finance ministers' finance minister'' in a euro zone ranking this month.

But the Netherlands broke the European Union's deficit limit of three per cent of gross domestic product in 2003 --denting Zalm's reputation and costing him several bottles of wine to citizens who took up a bet he offered in his online diary.

That drove Zalm's determination to reform government finances.

His ministry said earlier this month higher corporate tax revenues should push the government surplus up to 0.4 per cent of GDP this year.

The government forecasts the economy will expand three per cent this year and next, making the Netherlands one of the euro zone's best performers, after lagging in 2002 and 2003.

Zalm has been at the finance ministry for much of his working life. He joined as a staffer in the department for budget preparation in 1975, when Wim Duisenberg -- later the first president of the European Central Bank -- was minister.

He rose through the ranks and after a stint in the economy ministry, he ran the government's macro-economic think tank, CPB, before he became finance minister under Labour Prime Minister Wim Kok in 1994.

REUTERS BDP KP1235