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The Dutch government may have a harder time pushing through EUR18 billion in budget cuts and tougher immigration laws if it fails to take control of the Senate after Wednesday's regional elections.

Voters will elect 566 provincial deputies, who in turn are charged with choosing the Senate, an institution that can make or break laws. Because the center-right government doesn't have a majority in the 75-seat chamber, the outcome of the elections is seen as crucial. Prime Minister Mark Rutte has said that if the government fails to take control, as the latest polls suggest, he will have more trouble pushing through his reform agenda.

"It will become more difficult. If we have a minority, some plans will be watered down, which will prevent us from bringing back the current budget deficit," Rutte said in a recent interview with the daily newspaper De Telegraaf.

The government needs to cut spending by EUR18 billion up to 2015 to rein in the budget deficit, which ballooned during the financial crisis and the subsequent economic downturn, and stood at 5.2% of gross domestic product in 2010. However, the austerity package, which includes cuts in social security and civil services, and an increase in the retirement age, is less severe than belt-tightening programs in other parts of Europe.

Many economists see the Netherlands as one of the bright spots in fiscally troubled Europe. The country boasts the lowest unemployment in the European Union and its budget deficit will come in well below the EU limit of 3% of GDP in 2012, according to recent estimates of the CPB, the government's economic and policy adviser.

Failure to win a Senate majority could also further complicate Dutch politics, already tangled after national elections in June 2010 produced no outright winner.

Rutte's Liberal Party managed to squeeze out an agreement with the Christian Democrats to form the Netherlands' first minority government since World War II. The coalition, established after months of difficult talks, relies on the backing of the populist and anti-Islam politician Geert Wilders, whose Freedom Party provides parliamentary support, but holds no cabinet posts.

To secure Wilders' support, Rutte had to sacrifice his election promise to overhaul social security and the labor market. In another nod to Wilders, Rutte is planning tougher immigration measures, such as a ban on wearing burqas and plans to evict immigrants convicted of serious felonies.

"Apparently, this is the price [the government] has to pay for the Freedom Party's support," Wim Kok, a former prime minister for the Labor Party, said in an interview with daily Het Financieele Dagblad Monday.

Rutte's government hasn't faced many setbacks, despite an ongoing trial in which Wilders is defending himself against hate-speech charges. Failure to take control of the Senate would be the first blow to Rutte, whose popularity has surged since he took office.

Rutte, a 44-year-old former human resources manager at Unilever PLC (UNVR.LN), will have to use his negotiating skills and search for deals with the opposition if his government loses Wednesday's elections. "The government will have to water down its plans and make compromises," said Ruud Koole, a political science professor at the University of Leiden. "For every piece of legislation, [it] will need to find a majority."

Whether government stability would be at stake is hard to predict, analysts say. It would depend on the cabinet's negotiating skills, said Rinus van Schendelen, professor in political science at Erasmus University Rotterdam. But he suggested Rutte would not want to compromise his agreement with Wilders as the Freedom Party may then decide to withdraw its support.

Elections of this type normally don't cause much excitement in the Netherlands--turnout is expected to be below 50%--but the results will be closely monitored this time.

-By Maarten van Tartwijk and Robin van Daalen; Dow Jones Newswires; +31 20 571 5201; maarten.vantartwijk@dowjones.com

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