Netherlands in limbo after split election result

"We've said so many times - we go for gold - and we have got the gold," said Mr Balkenende despite losing three seats compared to the 2003 elections.

Labour lost a shock number of ten seats - primarily to the leftist Socialist Party which jumped hugely from nine to 26 seats and which is broadly identified as the real victor of Wednesday's poll.

Meanwhile, far-right politician Geert Wilders gained an unexpectedly high number of nine seats having run a campaign with strong anti-immigration tones.

Mr Wilders' gains came primarily at the expense of his former party - the Liberals - which lost six seats and which are now unlikely to return as a centre-right coalition party of Mr Balkenende.

Meanwhile, among the smaller parties, the left-liberal D66 were marginalized and the protestant Christian Union doubled its support, while the Party for the Animals entered parliament for the first time with two seats.

Grand coalition-plus?

Observers see the upcoming coalition-building as extremely difficult, with both centre-right and centre-left options falling far short of a parliamentary majority.

Dutch Liberal MEP Jan Mulder told EUobserver on the election night that "it will be extremely difficult to form a government and if there is a government, I am not sure it will prove to be stable. If there is no stable government in the Netherlands, that is also bad for the position of the Netherlands in Europe."

Not even a German-style "grand coalition" government of Christian Democrats and Labour - who fought each other bitterly in the campaign - would get enough seats for a majority, but it is seen as the only basis on which a workable government could be built with the help of a third party.

This third party could be either the Christian Union or the Socialist Party, a post-election TV debate indicated on Wednesday.

MEP Hans Blokland said his own party, the Christian Union, is the "most obvious" candidate to help a Christian Democrat-Labour government to a majority, adding however that "these will be long, difficult negotiations."

Labour however seems to favour the Socialist Party as a third partner for the coalition talks - a scenario which does not find favour with most Christian Democrats who see the Socialists as extreme-left, populist and anti-European.

Meanwhile, some commentators are worried that any coalition talks will fail, or that a new coalition will soon break up due to internal strife.

EU constitution talks

Former European Commissioner and Christian Democrat Frans Andriessen told EUobserver he is downbeat on the consequences of the Dutch vote for the Netherlands' position in the EU, ahead of expected re-negotiations of the EU constitution due to kick off next year.

He highlighted that both parties mooted as potential entrants to a new government - the Socialists and the Christian Union - campaigned on the "no" side of the failed referendum on the constitution, saying the Socialist party "has been leading in the rejection of the constitutional treaty and it never sketched any acceptable European alternative." The Christian Union is "not exactly enthusiastic about Europe either," he added.

"I'm afraid that with this outcome, it will not be that easy to take up a strong position in the negotiations [on a new treaty] which will be inevitable. We together with France have said "njet," but so far we haven't made any contribution to solve this problem," he said.

But the Christian Union's Mr Blokland said his party is "ready to talk about changes to the [current EU] Nice treaty," adding, however, that these changes should "respect the sovereignty of member states" and "not obstruct citizens and business."