With bailout near, Irish PM's coalition cracks
Monday, November 22, 2010; 8:46 AM
DUBLIN - One day after Irish Prime Minister Brian Cowen requested a financial bailout for his country from the International Monetary Fund and European Union, he faced a deepening political crisis as the junior partner in his ruling coalition called for a new general election in January.
Monday's move by the Green Party deepens the political turmoil that is unfolding in Ireland at the same time as Cowen's government is seeking a rescue package to prop up the country's banks and plug a massive hole in public finances.
Importantly, however, the Green Party said it would not withdraw its support immediately, but would remain a part of the governing coalition long enough to pass a new austerity budget that will dramatically slash government spending.
Passing the budget on Dec. 7 is considered vital to sealing the deal for an international rescue that could top $110 billion. The governing coalition led by Cowen's Fianna Fail party holds a majority in parliament of only three seats, making support by the six Green Party lawmakers essential.
"We have always said that our involvement in government would only continue as long as it was for the benefit of the Irish people," Green Party leader John Gormley told reporters in Dublin." Leaving the country without a government while these matters are unresolved would be very damaging and would breach our duty of care."
The Green Party's decision to leave the government at year's end virtually guarantees that Cowen, who was set to stay in office until 2012, will have no choice but to cut short his term and call new elections in January. It also will likely mean a fall from power for the Fianna Fail party, which has dominated Irish politics since the nation won independence from Britain in the first half of the 20th Century.
Opinion polls show the left-of-center Labor Party and center-right Fine Gael Party both leading Fianna Fail, whose public support has now eroded to 17 percent in some polls.
The International Monetary Fund and the European Union agreed Sunday to support the emergency bailout for Ireland after Cowen's near-bankrupt government--which for days had denied it needed help--abruptly requested a lifeline.
Ireland will become the second European nation in six months to require a multibillion-dollar rescue. The promise of aid comes as major nations in the region have been pressuring Ireland to accept a bailout, fearing its woes could spread to other troubled nations in the region, including Portugal and Spain, and potentially destabilize the euro.
But the currency advanced for a fourth day against the dollar and the yen on optimism that the rescue will prevent a spread across the region's debt markets.
On Monday, European markets declined for a second consecutive day, led by falling Irish bank stocks, and U.S. futures also sank lower as investors digested news of the bailout and tried to figure out what would happen next.
After a hastily arranged conference call from Dublin Sunday, in which Irish officials asked for help amid fears of a run on the banks, E.U. financial leaders and the IMF agreed in principle to come to Ireland's aid. But the key details of the package - including its size and the conditions attached to it - could take days or weeks to hash out between Irish officials and a team of negotiators from the IMF and the E.U.