Dutch Prime Minister Mark Rutte will submit his government’s resignation to Queen Beatrix today, reports say, paving the way for early elections.
The government was plunged into crisis when Geert Wilders’ Freedom Party pulled out of talks aimed at slicing 16bn euros (£13.1bn) from the budget.
Mr Wilders said he would not accept austerity demands to bring the budget deficit in line with EU rules.
His party was not part of the coalition but supported the minority government.
Dutch broadcaster Nos said Mr Rutte had arrived at 14:00 Dutch time (12:00 GMT) at the queen’s palace in The Hague where he was expected to make the cabinet’s resignation official.
Speaking after the cabinet meeting involving Mr Rutte’s liberal VVD and the Christian Democrats (CDA), Finance Minister Jan Kees de Jager said they would “show the financial market and Dutch people that we can also put forward a solid financial policy”.
AAA status
Since 5 March, the two coalition parties along with the Freedom Party have been trying to reach agreement on budget cuts. A recent forecast from the Netherlands’ Central Planning Bureau estimated that the country’s 2013 public deficit would rise to 4.7% of GDP, well above the 3% EU target.
The Netherlands has been asked to submit its budget measures to the European Commission by 30 April, although it is not clear how firm that deadline is.
Mr Wilders said the coalition’s proposals would harm economic growth and affect many people’s spending power. Socialist Party leader Emile Roemer said he too was not prepared to support the attempt to bring the budget deficit below 3% by 2013.
But there are fears that the failure of the budget talks could harm the Netherlands’ prized AAA credit rating status and the low yield on government bonds.
Economic Affairs Minister and CDA leader Maxime Verhagen said on his Twitter feed earlier on Monday that the main concern was “how, on the way to elections, we can keep the economy and finances on the rails”.
Dutch daily NRC Handelsblad reported that confidence in the Netherlands had already fallen on the financial markets on Monday, with the gap widening between Dutch and German government bonds.
Mr Rutte’s government lasted just 558 days. Only three other Dutch administrations since World War II have been in office for shorter periods, Dutch news agency ANP says.
A parliamentary debate on the Dutch political crisis is expected to take place on Tuesday afternoon.
