By Anthony Faiola
Friday, November 19, 2010; A11
DUBLIN - Ireland, whose economic woes are riling global markets, may be facing the prospect of yet another problem: a political crisis.
Prime Minister Brian Cowen's rapidly draining support at home comes as Ireland is closing in on a multibillion-euro bailout with the International Monetary Fund and the European Union. Amid signs that its hard-hit banks are losing deposits and may need a fresh lifeline that the cash-strapped government cannot afford, Irish officials began rescue talks in Dublin on Thursday with an emergency team of IMF, E.U. and European Central Bank negotiators.
At the same time, Cowen is sustaining blistering attacks from the opposition, as well as from some of his own backers, who are charging him with mishandling the crisis and misleading the nation about pending international aid. Observers said it was uncertain whether his governing coalition, with the slimmest of majorities in parliament, could muster enough support to win a key vote on new austerity measures over the next two weeks. Its failure, analysts say, could bring down the government and complicate any bailout deal.
Cowen's problems underscore concerns that political turmoil could further cloud the fortunes of a number of European countries, whose frail economies and whopping budget deficits are threatening to ignite another debt crisis.
Fears of political instability have subsided in hard-hit Greece, as well as in Spain, where Socialist governments have solidified their power and resisted general strikes, emerging as surprisingly aggressive cost-cutters.
But concerns are festering elsewhere. In Italy, for instance, the many scandals of Prime Minister Silvio Berlusconi have left him fighting for his political life just as his government is trying to push through an austerity budget considered pivotal to easing investors' minds.
In Portugal, which European officials say may be next in line for an international bailout, the minority government in Lisbon survived a key vote on the tight 2011 budget this month. But Foreign Minister Luis Amado warned last weekend that its failure to secure a broader governing coalition could jeopardize its ability to push through deeper cuts and could result in Portugal's ejection from the euro.
"That is a situation that could inevitably be forced upon us by the markets," he told the Expresso newspaper in Lisbon.
Here in Ireland, Cowen is on the ropes, as the nation is stung by a roiling banking crisis and a budget deficit almost three times worse than the one in the United States when measured against the size of the economy.
The prime minister, 50, is the scion of a political family and leader of Fianna Fail - the storied party that has dominated political life in Ireland since its hard-fought independence from Britain in the early 20th century.
Lampooned by the likes of Jay Leno and skewered by the national media, the portly Cowen is finding himself the butt of every joke in Dublin pubs these days. But the Irish are not just laughing. Many here say they are furious about the $68 billion the government has pumped into still-ailing banks hurting from a real estate collapse here, plunging Cowen's support in opinion polls to 18 percent. Ireland's fiscal deficit also made this nation among the first in the European Union to slash spending this year, cutting everything from benefits to widows and the blind to state worker salaries. The Irish are now bracing for far deeper cuts.
Yet the Irish also appear mystified - and angered - by Cowen's refusal to acknowledge that negotiations are underway for an international bailout. On Wednesday, even as IMF and E.U. officials were heading to Dublin, he denied in parliament that talks were about to take place. On Thursday, even after some of his top officials conceded that Ireland is likely to accept aid, the prime minister maintained that the government may not need help, leading the local media to dub the pending rescue "the bailout that dare not speak its name."
"I mean, does the man think we are bunch of fools?" fumed Edward Byrne, a Dublin taxi driver who lost his job as a house painter during the real estate bust. "The IMF is coming, everyone 'round here knows it. He just refuses to be honest with the people, and use the word 'bailout.' "
Fine Gael, the largest opposition party, called Thursday for Cowen to resign. That occurred as his highly criticized handling of the economic crisis has increased the chances that the government may fall in the coming weeks. His junior coalition partner, the Green Party, suggested this week that it may rethink its alliance. In addition, the government is facing a critical vote on the budget, as well as regional elections. Some observers say Cowen may survive the test, in part because the opposition has no desire to immediately force a no-confidence vote and take the reins of the nation.
"If they don't go down at the budget, they'll be likely to go down by the spring," said Elaine Byrne, political analyst at Dublin's Temple University. "You can't imagine how unpopular this government is right now."
If Cowen, whose term ends in 2012, is forced to call early elections, it could result in a stronger, more popular government made up of the Irish opposition. But an all-too-sudden crumbling of his government may only compound Ireland's problems, potentially provoking another round of investor panic.
Sources close to Cowen call criticism directed at him unfair, particularly over his refusal to admit that Ireland needs financial help. The government is still holding out hope that it can win direct aid for its banks, but not for the government itself, allowing Cowen to avoid having to acknowledge that his government accepted a bailout - a politically loaded word. But observers call such a deal unlikely, given that aid from the IMF and the European Union is structured to be funneled through national governments, not private banks.