The new Irish coalition government
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Added on March 6, 2011 at 22:06 Naples time
The Fine Gael and Labour 64-page
coalition agreement ratified by the two parties today aims to reduce
the national deficit by cutting the 2012 budget by another €3
billion. The 3% of GDP deficit - the Maastricht limit for eurozone members -
should be reached by 2015. The coalition will demand a renegotiation
of the EU/IMF bailout deal. The new cabinet will be presented next
Article added on March 6, 2011 at 12:04 Naples time
The leaders of Fine Gael and
Labour announced today, March 6, 2011 that they had reached an
agreement on key subjects including some austerity measures to take to bring
Ireland back to a balanced budget as well as the terms of the joint €85
billion IMF/EU bailout accepted by the ousted Fianna Fail government
at the end of 2010. Differences remain regarding the future size of the
public sector, Labour being less in favor of spending cuts and keener on tax
Fine Gael was the clear winner of the parliamentary election but failed to
win an absolute majority of seats to form an independent government.
Therefore, Fine Gael leader Enda Kenny immediately started talks with Labour
leader Eamon gilmore to form a coalition government.
Fianna Fail has dominated Irish politics since 1932 but lost 57 of its 77 of its members
in the Lower House of parliament in the 2011 election; with 20 seats, it is
now Ireland's third largest party. The brutal
austerity measures adopted in December 2010 was the last nail in the
party's political coffin.
Fianna Fail has been key in ensuring Ireland's economic
unprecedented progress in the last decades.
Ireland was a real Celtic Tiger, before succumbing to the temptations of
easy money with the 2002 introduction of euro coins and banknotes (as
an accounting currency, the euro was already introduced in 1999).
Subsequently, the country went on a
downhill slope, carried away by a gigantic property speculation
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The new coalition government formed by Ireland's two largest parties, Fine Gael and Labour, has a
very small room for maneuver despite its clear majority in the Lower House (Dáil
Éireann); in the 166 Dáil, Fine Gael controls 76 seats (+25), Labour 37
The Irish parliament has shifted to the left. But there is nothing left to
distribute. It is no time for the nanny state. The unemployment rate stands
above 13.5%. But there comes a point where further budget cuts do not make
much sense either. A moderate tax increase may well be the better solution
for both the Irish budget and the Irish economy. It is just important to
keep the increase limited enough in order not to hamper Ireland's
comparative advantage of low taxes. Anyway, it will take years for the
Celtic Tiger to recover from the real estate bubble and bailout of reckless
The 6% interest rate to pay on the gigantic and misguided banking bailout is
a heavy burden. The
“rescue package” did not save the
banking mess, but dragged down the Irish state as well as the Irish
economy as a whole. Now both the private and the public sector are in
distress. The Irish economy will still consolidate aka shrink further in
2011. With rising oil prices, the outlook is grim. The times
of austerity are far from over. The details of the coalition deal to be
published later today, March 6, will help to better assess Ireland's future.
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