SALON

Tuesday, Nov 23, 2010 6:23 PM UTC

Political chaos engulfs Ireland, threatens bailout

Rebels from PM's own party press to oust premier; opposition leaders demand an election before Christmas

By

Topics: Ireland, Economics, European Union,

Political infighting engulfed Ireland on Tuesday, threatening to trigger a quick election and delay a massive EU-IMF bailout. Rebels from Prime Minister Brian Cowen’s own party pressed to oust him and opposition leaders demanded an election before Christmas.

Despite the discontent, Cowen’s Cabinet colleagues in the Fianna Fail party said they were confident the rebels have too few votes to pursue a no-confidence motion against Cowen.

At stake is the future course of the potentially euro100 billion ($135 billion) European Union and International Monetary Fund rescue of Ireland, a nation heading toward bankruptcy next year because the government cannot pay an ever-escalating bill to save its state-backed banks.

Ireland’s deficit this year is 32 percent of GDP, the highest in Europe since World War II. Its banks are running short of cash because they can’t borrow on open markets. Analysts increasingly warn that Ireland’s bank-bailout bill could ultimately reach euro90 billion ($125 billion) — double the government’s current forecast — because of defaults looming down the road, particularly in residential mortgages.

The Irish political and economic crisis, and its uncertain solution, drove up borrowing costs Tuesday for Portugal, Spain, Greece and Italy, all of whom face their own mounting debt-financing struggles. The rising interest rates on eurozone bonds reflect fears that a third member of the 16-nation eurozone — after Greece and Ireland — might be backed into its own bailout corner soon.

The Irish Cabinet gathered at Cowen’s office to complete a four-year plan for unprecedented budget cuts — a condition of Ireland’s international bailout. The plan, which proposes to slash euro15 billion ($20 billion) from the country’s 2011-14 budget deficits through a combination of cuts and tax hikes, is to be published Wednesday. The 2011 budget will follow Dec. 7.

Transport Minister Noel Dempsey said the EU-IMF rescue aid couldn’t flow until Ireland began slashing euro6 billion ($8.2 billion) from its 2011 deficit.

“We don’t have the luxury of time in relation to this,” Dempsey said. “We asked for assistance. We were given that assistance on the basis that we were going to produce this four-year plan, that we were going to produce a budget, and that budget would pass. If we can’t do that, then the assistance isn’t there.”

Two separate Fianna Fail meetings were scheduled for Tuesday — one led by party rebels, the second by the party’s full 70-strong bloc in Dail Eireann, Ireland’s parliament.

“There’s serious discontent within the parliamentary party. I believe it’s now up to those who’ve spoken out to take soundings amongst their colleagues to take action to remove that man (Cowen) immediately,” Fianna Fail lawmaker John McGuinness said.

But Cowen loyalists said McGuinness and other rebels wouldn’t be able to gather the 18 signatures required for a no-confidence vote to be scheduled.

Cowen conceded Monday night he must call an election next year but sought to delay it as long as possible. His hand was forced when the junior party in his coalition, the Greens, said it would withdraw support once the 2011 budget passed.

The Greens said they expected the country to hold an election by late January, but Fianna Fail officials say the budget will require multiple votes on different tax increases, which could drag the process into February.

The Fianna Fail minister for tourism and the arts, Mary Hanafin, accused the Greens of undermining Ireland at a critical moment.

“I’m not sure they (the Greens) have shown they have the best interests of the country at heart,” Hanafin told Irish state radio RTE.

Hanafin said she wouldn’t back any push to oust Cowen — but would put her name forward if the leader’s post became vacant.

At the European Parliament in Strasbourg, France, EU monetary and financial affairs minister Olli Rehn gathered Ireland’s 12 European lawmakers for a confidential briefing — and came out stressing they must stop the political infighting long enough to pass the 2011 budget.

“It is essential that Ireland pass the budget in the timeline foreseen, and sooner rather than later, because every day that is lost increases uncertainty,” Rehn said.

Cowen pleaded with opponents not to force him from office until the budget becomes law and the EU-IMF money is flowing into Irish banks. But opposition lawmakers emphasized they were determined to oust him as soon as possible in pursuit of a pre-Christmas election.

“What’s the point of a government preparing a four-year plan that they won’t preside over, that they won’t be there to implement, and that they haven’t consulted the people on?” said Fine Gael lawmaker James Reilly.

Reilly and Labour lawmakers both contended that, if Cowen resigned immediately and dissolved parliament, an election in mid-December could lead to the new government’s revised budget being passed by Christmas. Dempsey of Fianna Fail, however, called that schedule “quite impossible.”

Labour and Fine Gael are refusing to say whether they will actually vote against the budget, should Cowen survive to Dec. 7. If either party’s members abstained, the budget would pass by default.

“It may be the case that the main opposition parties will abstain on the vote. It’s imperative they do that in the national interest,” said Dermot O’Leary, analyst at Goodbody Stockbrokers in Dublin.

Shares in Ireland’s three remaining banks on the Irish Stock Exchange tumbled for a second day Tuesday as investors foresaw increasing bailouts and state control as inevitable.

Patrick Honohan, the Irish Central Bank governor, fueled those fears with a speech Tuesday to Dublin accountants. He said Ireland’s bank-rescue efforts were right in theory but had failed to restore the confidence of foreign investors, who have withdrawn tens of billions’ worth of deposits since the summer.

He said Irish banks must greatly increase their own reserves in response and actively seek foreign buyers.

“They’re all for sale as far as I’m concerned,” he said of Ireland’s six banks, three of which have already been nationalized.

Bank of Ireland shares plummeted 33 percent to a new record low of euro0.26 before recovering slightly. Allied Irish Banks fell 17 percent to euro0.34. Insurance and mortgage specialist Irish Life & Permanent — Ireland’s only bank yet to receive a state bailout — shed 9 percent to euro0.76, then recovered virtually all of its losses in afternoon trade.

The government already owns 36 percent of Bank of Ireland and 18 percent of Allied Irish. The latter bank expects to hand more than 90 percent ownership to the government next month after it offers euro6.6 billion in new, overpriced shares for sale — and finds the government is the only buyer.

More Shawn Pogatchnik.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 7 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: Chekhov's story mirrors Russia's own

Recommendations