You could almost hear the mass exhaling across European capitals when the Dutch election exit polls were announced on Wednesday evening.

Dutch Prime Minister Mark Rutte had managed to win more seats than the maverick politician Geert Wilders, who made his name by promising to ban Islam and march the Netherlands out of the European Union in a "Nexit."

Never mind that Rutte actually won fewer seats than his last win and that Wilders gained five, making his PVV the second-largest bloc in the Dutch Parliament. This was an election that came to be about beating Wilders.

"It is an evening in which the Netherlands, after Brexit, after the American elections, said, 'Halt' against the wrong sort of populism," Rutte told his supporters at a victory party.

You could just picture mainstream politicians in Paris and Berlin uncurling their toes and unclenching hands that must have been covering their eyes for weeks as Wilders led the polls. Now it was safe to look. Their worst fears had not come to pass.

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Demonstrators outside the Dutch House of Representatives celebrate the election results on Thursday. (Michael Kooren/Reuters)

They celebrate with good reason. Even though Wilders would likely not have been able to form a government given his lack of political allies, it would have been a huge blow for one of the EU's founding member states to have anointed an anti-EU party.

The 28-nation bloc is still reeling from Britain's decision to leave the EU and U.S. President Donald Trump's apparent intense dislike of Brussels and its Eurocrats.

Merkel faces her own challenge

German Chancellor Angela Merkel, one of the first to call Rutte to congratulate him, faces her own challenge from the right in elections this spring.

Most of the white-collar workers and students I spoke to as they cycled or walked along Amsterdam canals the morning after the vote professed relief at the result, even though Rutte's Freedom and Democracy Party wasn't everyone's first choice.

"The most important thing is the PVV didn't get the most votes, so that's positive," said Joost Antonis.

"I'm glad that I live in a city that thinks that way."

It was a reaffirmation for many of Holland's famously laid-back citizens that their fellow citizens have not become so disenchanted with the political system that they would vote overwhelmingly for a man who has no problems calling Moroccans "scum" and equating the Koran with Hitler's Mein Kampf.

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Members of the VVD party of Prime Minister Mark Rutte celebrate after the first exit poll results of the Dutch parliamentary elections were announced in The Hague on Wednesday. (Patrick Post/Associated Press)

But on some levels Rutte's win is a hollow victory, say analysts. Because his strategy for beating the right-wing populist in the last weeks of the campaign was to adopt some of Wilders' own aggressive language on immigration and outsiders.

"It helped him, clearly," says Floris Vermeulen, who chairs the department of political science at the University of Amsterdam. "Very important is the open letter [Rutte] published in newspapers before the elections," he said.

"It's the same message for everyone," said the full-page newspaper ad in January.  "If you don't like it here, leave the country. Go away."

Part of Wilders' appeal to some Dutch voters has been his insistence that immigrants threaten Dutch traditions such as gay rights, legalized prostitution and an emphasis on equality.

A smokescreen for racism?

His critics call it a smokescreen for racism.

"I think Islam and freedom are not compatible, but we are a free country," Wilders told reporters on election day. "You are free to go and leave whenever you want.  So that's my message to [Muslims]."

Wilders also said the "genie" of what he describes as patriotism was out of the bottle, whatever the results of the election would be.

Vermeulen says Wilders is likely bitterly disappointed.

"I mean, what does he need to really win? There was the refugee crisis, there was Trump in the United States, there was many signs that populism could indeed succeed in the Netherlands.  And he did very weird in the campaign.  Almost completely silent."

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German Chancellor Angela Merkel attends the weekly cabinet meeting in Berlin on Wednesday. She too faces a challenge from the right in elections this spring. (Markus Schreiber/Associated Press)

Some Dutch voters have always relegated Wilders to the margins.

"I think Wilders has no importance because Wilders has no party, really," said Sander Brouwer, a retired teacher in his 70s.

"He is only himself. If he discriminated against Catholics the same way as Islam I should perhaps agree with him," he added with a glint in his eye.

Wilders has been a fixture on the political scene in the Netherlands for several years and there is no indication that he plans to withdraw.   

Vermeulen says the election result, when taken with one of the little-reported developments of the campaign, sets the stage for divisive times ahead.

A new immigrant party arises

 A new immigrant party called Denk ("Think" in Dutch) advocating tolerance and a register of hate speech, has entered the parliament for the first time, winning three seats.

"Traditional parties were unable to capture or represent those immigrant voters. And so they decided to do it for themselves. In the long run it shows that polarization has increased immensely in the Netherlands."

Many voters frustrated with larger mainstream parties turned to smaller new parties on the scene, a development that could make unity more difficult to achieve.

One thing the Dutch are not is disengaged.  Voter turnout was apparently 80 per cent.