Dutch Prime Minister Mark Rutte's Liberal Party and the Labour Party have agreed a coalition deal.
The deal paves the way for a pro-austerity, pro-European government to be sworn in as early as next week.
Mr Rutte's Liberals won the most seats in a parliamentary election on 12 September.
Mr Rutte and Labour leader Diederik Samsom have been in coalition talks since then.
Labour needs support from its members at a party conference set for 3 November for the deal to be finalised.
The two party leaders have reached a deal far faster than expected, underlying the urgent need to form a government given the European crisis and the fragile state of the Dutch economy.
The agreement includes plans to cut state spending by a further €16bn in the next four years, aiming to all but eliminate the budget deficit by 2017, newspapers reported last week.
In June, government forecaster and think tank CPB projected a deficit of 2.6% of economic output for 2017.
The Netherlands is already implementing a €12bn austerity programme agreed in April.
It is one of a handful of remaining AAA-rated economies in the eurozone and has been at the forefront of calls for tight fiscal policies across the eurozone to tackle the region's debt crisis.