No leadership heave for Irish PM

The Irish prime minister has come under increasing pressure to call an election

There was no challenge to the Irish Prime Minister’s leadership at a meeting of the Fianna Fáil Parliamentary Party on Tuesday night.

It had been expected rebel members of the party would call on Brian Cowen to quit ahead of a budget announcement on 7 December.

However, no challenge to his leadership was made at the meeting.

It is now likely Mr Cowen will continue to lead the Irish government, at least until the budget is passed.

Meanwhile, RTE has reported that the EU and IMF have extended 85bn euros (£72bn) of emergency loans to Ireland.

The package would see the level of capital in the Irish banks being increased from 8% to 12% in “a move to bolster confidence of depositors in the financial system”.

Dublin is expected to publish a four-year austerity plan on Wednesday amid fears the government could fall.

A number of backbench MPs, including Cork’s Noel O’Flynn, expressed their unhappiness with Mr Cowen’s leadership and called on him to step down.

However others, including Galway TD Noel Treacy, defended Mr Cowen, who told TDs that he would remain on as leader to see through the publication of the four year plan, the budget and the duration of the IMF talks.

It is now unlikely that Mr Cowen will face a challenge to his leadership until after the budget.

Several government ministers have indicated their interest in the position including Tourism Minister Mary Hanafin.

But no challenge was made at Tuesday’s meeting despite claims from back-benchers that it would be a “bare knuckle” affair.

Opposition parties have called on Mr Cowen to step down and have also urged him to bring the budget announcement forward from December 7 to next week.

Addressing the Dail (parliament), on Tuesday Mr Cowen he insisted there was no intention on his part to cling on to power.

Rather, he said the government had to wait for November’s tax returns to ensure its figures were up to date.

On Sunday, EU member states and the International Monetary Fund (IMF) agreed to provide loans to Ireland in an attempt to bring an end to the crisis surrounding the Irish Republic’s debts.

Four-year plan

The Taoiseach has already tried to persuade opposition leaders to delay an election until the 2011 budget has been put into effect.

In that case, parliament is unlikely to vote on the budget until January, meaning an election could not take place until February or March.

Mr Cowen argued that it was necessary first to put forward Wednesday’s four-year financial plan in which proposals for 15bn euros in savings will be announced.

The government is likely to reduce social welfare benefits and the minimum wage in an attempt to cut the 2011 budget by 6bn euros.

“My sole motivation is to ensure that the four-year plan is published, as agreed with the people with whom we are dealing, and that a budget is passed by the House,” he said.

Brian Hayes, Fine Gael’s shadow finance minister, told the BBC that the opposition wanted to see the budget as soon as possible.

“The important thing, to bring real confidence back to this country, is ultimately for a change of government, a swift general election, and that those who led us into the mire, namely Fianna Fail over the past 14 years, will then be put into opposition,” he said.

Mr Cowen announced on Monday that a general election would be held early next year. He was speaking after his government’s junior coalition partner, the Green Party, called for an election in January.

But Fine Gael and the Labour Party called for an election as soon as possible and one party, Sinn Fein, has tabled a no-confidence vote.

Mr Cowen, leader of Fianna Fail, heads a coalition with a three-seat majority and faces a by-election on Thursday which it is expected to lose.

Late on Monday, the Mr Cowen phoned Fine Gael leader Mr Kenny and Labour Party leader Eamon Gilmore.

Formally, Mr Cowen offered to make available to them the financial advice underpinning the proposed budget, the Irish Times reports.

But the phone calls signalled a first move in a strategy to persuade the opposition to let the budget pass, the paper says.

It is understood that both Mr Kenny and Mr Gilmore told Mr Cowen they wanted to see an immediate dissolution of the Dail with an election before, rather than after, the budget.

What went wrong in the Irish Republic

The 1990s were good for the Irish Republic’s economy, with low unemployment, high economic growth and strong exports creating the Celtic Tiger economy. Lots of multi-national companies set up in the Republic to take advantage of low tax rates.

At the beginning of 1999, Ireland adopted the euro as its currency, which meant its interest rates were set by the European Central Bank and suddenly borrowing money became much cheaper.

Cheap and easy lending and rising immigration fuelled a construction and house price boom. The government began to rely more on property-related taxes while the banks borrowed from abroad to fund the housing boom.

All this left Ireland ill-equipped to deal with the credit crunch. The construction sector was hit hard, house prices collapsed, the banks had a desperate funding crisis and the government was receiving much too little tax revenue.

The economy has shrunk and the government has bailed out the banks. A series of cost-cutting budgets have cut spending, benefits and public sector wages and raised taxes. But there are still doubts about future government funding.

The main concern for the Republic’s economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.

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According to the lead story in Tuesday’s Irish Independent, Mr Cowen’s days as Fianna Fail leader were “numbered despite his pledge to limp on in power”.

“I predict murder at the parliamentary party [meeting],” one unnamed backbencher told the paper.

“There’ll be war there. I know there will.”

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