Cowen Support Starts to Unravel as Independents Threaten Budget

Irish Prime Minister Brian Cowen’s government started to unravel one day after it turned to the European Union for an international bailout.

The Green Party, Cowen’s junior coalition partners, today called for a January election, saying voters felt “misled’ by Cowen’s handling of the crisis. Independent lawmaker Jackie Healy-Rae told state broadcaster RTE that he may not support the budget, which is scheduled for Dec. 7, and fellow independent Michael Lowry said he is “highly unlikely” to support the budget unless opposition parties have a “serious input.”

Support for Cowen is evaporating after he yesterday asked the EU and the International Monetary Fund for a rescue just one week after his government said no talks were underway. While the Greens have said they will support the budget, losing the independents could deprive Cowen’s Fianna Fail government of a majority. That may force him to turn to the opposition Fine Gael and Labour parties for help.

“It would seem to be the right thing to do in terms of the national economy and would also be politically astute” for Fine Gael and Labour to either support of abstain from voting on the budget, said Austin Hughes, chief economist with KBC Bank Ireland. “The likelihood is that Fine Gael and Labour would prefer that the poison chalice is taken away from them for the moment.”

Cowen currently has the support of 82 lawmakers in the parliament, including six Greens and a number of independents, compared with 79 for the combined opposition. His party may also lose a seat in Donegal at a local election in north west Ireland on Nov. 25. The Greens said today they want a national election in the second half of January.

Formal Talks

Cowen’s position is weakening just as he opens formal negotiations with the EU and the IMF over a rescue package that Goldman Sachs Group Inc. says may be worth 95 billion euros ($130 billion). Some opposition lawmakers signaled they may not automatically reject the budget in the current circumstances.

Richard Bruton, enterprise spokesman with Ireland’s largest opposition party Fine Gael, said today “we may need some emergency measure in place in order to get us to a general election.” Labour lawmaker Pat Rabbitte said the reputation of the country depends on the upcoming budget.

Irish bonds, which earlier rebounded after the government asked the EU to bail out its banking system, pared gains. The yield on the 10-year Irish government bond was at 8.31 percent at 2:08 p.m. in London after falling as low as 7.52 percent earlier today.

Support for Fianna Fail, which has governed Ireland since 1997, dropped to a record low this month, the Sunday Business Post said yesterday. Backing for Fianna Fail dropped 1 percentage point to 17 percent, the paper said. Fine Gael rose 1 percentage point to 33 percent, while Labour was unchanged at 27 percent, according to the report.

The poll of 1,000 people by Red C was carried out between Nov. 15 and Nov. 17, a day before EU, IMF and European Central Bank officials arrived n Dublin to start talks on an Irish rescue package.

To contact the reporters on this story: Joe Brennan in Dublin at Jbrennan29@bloomberg.net; Simone Meier in Dublin at smeier@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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