Dutch Queen Beatrix has asked for parliament to be dissolved so that elections can be held on September 12, leaving the country open to months of political and economic uncertainty after the government collapsed in a row over budget cuts.
The triple-A rated Netherlands has been one of the euro zone's most stable countries but has been plunged into a political crisis, worrying financial markets focused on the region's debt troubles.
The euro zone fiscal compact will lose what remains of its credibility if even one of the AAA members is politically unable to implement the austerity measures required to adhere to this rule, Rabobank said in a research note.
After losing his main ally, care-taker Prime Minister Mark Rutte is desperately trying to find support from opposition parties for budget cuts to put the country on track to meet the European Union's deficit targets.
The largest opposition parties on Tuesday refused to back his 14 to 16 billion euros package of cuts, and now he has less than a week to win support from smaller parties so he can present his plans to the EU by April 30.
With doubts growing across Europe about the price of austerity, parties to Rutte's left said trying to meet the EU's deficit target of 3 percent of gross domestic product in 2013 would hurt the economy and the Dutch people.
A statement issued by the prime minister's office said the Queen of the caretaker government requested the dissolution of the House of Representatives, to allow elections to go ahead on September 12.
Rutte's centre-right government tendered its resignation on Monday after only 18 months in power and the elections will be the fifth in ten years.
Rutte's two-party coalition had relied on the Freedom Party - headed by Geert Wilders, the eurosceptic, anti-Islam politician - to get legislation through parliament, even though the Freedom Party remained outside the government.
But Wilders withdrew that support at the weekend after seven weeks of negotiations on the extra budget cuts, without which the deficit is forecast to reach 4.6 percent of GDP next year.
(Editing by Anna Willard)