AMSTERDAM (Reuters) - The Dutch coalition government collapsed Saturday when the two largest parties failed to agree on whether to withdraw troops from Afghanistan as planned this year, Dutch media reported.
The ANP news agency and RTL television said Prime Minister Jan Peter Balkenende's cabinet fell apart after hours of talks that extended into the early hours of Saturday.
As NATO increases efforts to contain the Taliban insurgency, it has asked the Netherlands to "investigate the possibilities and desirability of a longer stay in Afghanistan" for its 2,000 troops based in Uruzgan province.
Balkenende's centre-right Christian Democrat CDA, the bigger partner in the coalition, floated the idea of keeping a reduced force in place for a year past the August 2010 deadline.
This met with stiff opposition from Deputy Prime Minister Wouter Bos, whose Labour Party wants the Afghan mission to end as promised, with "the last Dutch soldier gone from Uruzgan by the end of the year."
The Balkenende government took office three years ago.
If an election is held before the unveiling of next year's budget in September, it would effectively nullify an existing agreement to hold off any austerity steps until 2011.
That could open the door for a new government to bring forward austerity measures to bring the budget deficit under control, in response to criticism against the Balkenende coalition for being too indecisive over making tough decisions.
This week, the Dutch government's main think-tank raised its 2010 budget deficit forecast to 6.1 percent of gross domestic product but called for a 2011 deficit of 4.7 percent, implying that steep spending cuts will be needed.
That could crimp the Dutch economy, which data last week showed has just entered a fragile recovery after four straight quarters of negative growth.
(Reporting by Reed Stevenson and Aaron Gray-Block, editing by Ralph Gowling)
