Irish PM is forced to call election as €90bn bailout sparks unrest

Deal agreed but coalition falls apart – and Europe fears Spain is at risk

An extraordinary day in Irish politics ended in a major setback for Brian Cowen's government last night after his coalition allies forced him to concede an election as soon as his budget goes through.



The Green party, which has kept Mr Cowen's Fianna Fail in power for several years, effectively pulled the plug by calling for an election in January, giving him little notice of its demands.

After a day of frantic activity in which it became clear the government would not last beyond January, the Irish Prime Minister gave way to the demands of the Greens, who specified they would stay in government until the budget was passed and an agreement hammered out with the IMF, EU and European Central Bank.

Mr Cowen's sudden announcement transformed the Dublin political landscape at exactly the moment that the intervention of the international European institutions changes the economic landscape.

The main opposition parties meanwhile repeated their demands for an immediate election, in the knowledge that Fianna Fail is so unpopular that it is bound to be swept from office whenever a contest is held.

Officials from the IMF, EU and ECB continued their work in Dublin on a programme designed to enact widespread cuts and new taxes to the tune of €15bn (£13bn). They are expected to provide up to €90bn in funds and promises.

As far as the EU is concerned, the precise complexion of the Dublin government is less important than securing a deal and avoiding the "contagion" that so nearly destroyed the euro itself during the Greek crisis.



Portugal and Spain are the next nations in danger. "Of course if Spain does get caught in the crosshairs, it's going to be an absolute nightmare for Europe because it just can't bail it out. It hasn't got the facilities," David Morrison, market strategist at GFT Global, said. Confidence in Ireland, already at a low level, could dip further if scenes of social unrest follow demonstrations being called by the trade unions. For now, it remains unclear whether the Ireland bailout will be conditional on a rise in her corporation tax rate, currently 12.5 per cent, the lowest among EU countries.

Resented by the UK, France and Germany, it is a "red line" for Irish negotiators. The risk with making Ireland push it up, as with the expected budget cuts, is that such moves might actually deprive Ireland of the ability to grow her way out of trouble.

Some six months after her bailout, Greece's position remains precarious, partly for that reason. By January at the latest, a general election will sweep the deeply unpopular Fianna Fail party from power. But by then the EU and IMF hope that the Irish parliament will have accepted a four-year plan and a budget making cuts of €6bn.

The government's four-year plan is due to be unveiled tomorrow with the budget to follow on 7 December. But there is no absolute assurance that the budget will pass, since yesterday independents – who normally support the administration – announced they are highly unlikely to do so. The fact that Mr Cowen's troubled administration had finally run out of road emerged on a day of fast-moving developments triggered by the Green party's call for an election.

The Greens said they wanted an election because "the past week has been a traumatic one for the Irish electorate – people feel misled and betrayed." This was followed by more bad news for Mr Cowen when the independents threatened to vote against his budget.

Several of his own backbenchers also weighed in, calling on him to resign, while a senior party figure said the party should gather after Christmas to consider its leadership. A former minister, Mary O'Rourke, said of Fianna Fail members: "They are confused. There is distinct worry about the future of the party. We can't run around in circles any more."

The day had not started so badly for the government. Until the announcement by the Greens, the markets had reacted favourably to economic developments. The "risk premium" demanded by investors to hold Irish government bonds had fallen, indicating that they felt a general meltdown in the eurozone was becoming less likely. But fears of contagion to other eurozone nations remain. The Portuguese Prime Minister, Jose Socrates, said he hopes emergency funding for Ireland will end uncertainty in the financial markets: "[Portugal] does not need any help. What the country needs is to approve the budget, and to continue in its efforts [to cut its deficit]."

But it was not long until the major opposition parties were calling for an immediate election. Dublin politics was thus plunged into a swirl of uncertainty about whether Mr Cowen could get his budget through and whether he personally will survive the crisis.

While Mr Cowen's Fianna Fail party is the most efficient election machine in Ireland, with support at a dismal 19 per cent it stands no chance of re-election. It is universally expected to be displaced by a coalition of the two biggest opposition parties. Although some speculated that Fine Gael might facilitate Mr Cowen in getting his budget through, the party warned that it would not give the government a blank cheque. Mr Cowen said last night that he wants to continue in his job. Asked if he would lead his party into the next election, he said it was an issue for the party to decide.

News
The surrealist comedian at the Q Awards in 2010
people
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to American media group
Extras
indybest
Arts and Entertainment
Sir Nicholas Serota has been a feature in the Power 100 top ten since its 2002 launch
art
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidate on the verge of tears as they were ejected from the boardroom
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
Wilko Johnson is currently on his farewell tour
people
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
News
Let’s pretend: KidZania in Tokyo
educationKidZania lets children try their hands at being a firefighter, doctor or factory worker for the day
Life and Style
CHARGE BOOSTER: Aeroplane mode doesn't sound very exciting, but it can be a (phone) hacker's friend. Turning on the option while charging your mobile will increase the speed at which your phone battery charges
techNew book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Solutions Architect - Permanent - London - £70k DOE

£60000 - £70000 Per Annum Excellent benefits: Clearwater People Solutions Ltd:...

General Cover Teacher

£110 - £130 per day: Randstad Education Reading: Great opportunities for Cover...

Maths Teacher

£110 - £130 per day: Randstad Education Reading: QTS Maths Teachers needed for...

Maths Teacher

£110 - £130 per day: Randstad Education Reading: QTS Maths Teachers needed for...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?