After the January 22, 2003 elections the division of the 150 seats in the lower house (Tweede Kamer) was:
|Christen Democratisch Appèl (CDA)||44|
|Partij van de Arbeid (PvdA)||42|
|Volkspartij voor Vrijheid en Democratie (VVD)||28|
|Socialistische Partij (SP)||9|
|Lijst Pim Fortuyn (LPF)||8|
|Democraten 66 (D66)||6|
|Staatkundig Gereformeerde Partij (SGP)||2|
On January 24, Queen Beatrix asked Piet Hein Donner (minister of justice for the CDA in the previous cabinet) to lead the coalition negotiations. The negotiations for the coalition were lengthy. Initially the CDA preferred to continue its right-wing coalition with the VVD, but they did not have sufficient seats in the Tweede Kamer without the support of a third party. Another coalition with Lijst Pim Fortuyn would be likely to be unpopular with voters, after the events of the first Balkenende cabinet and D66 was unwilling to join a coalition. A long negotiation between CDA and PvdA followed, but after a couple of months was called off by Balkenende. At this point, D66 decided to join the coalition after all.
The cabinet took power at a time when the Netherlands economy was in poor shape, with increasing unemployment and slight economic contraction. In its budget of 16 September 2003, the cabinet announced budget cuts of 5700 million euro, making a total of 11000 million euro when combined with the cuts announced by the previous cabinet. Among other measures, free dental care, physiotherapy and anti-conception medication were cut, 12000 positions were to eliminated in the armed forces and some of their bases closed, the link between benefit payment rates and salaries was to be broken, and the rental housing subsidy was reduced. At the same time, 4000 million euro in extra spending was made available, mainly in education and justice.