Ireland's Fine Gael, Labour May Form Coalition as Political Power Shifts

Ireland’s two largest opposition parties may form a coalition government after the collapse of the banking system and an international bailout handed Fianna Fail a record election defeat.

Counting will continue today to fill the 166-seat parliament, with an exit poll giving Fine Gael and the Labour Party a combined 57 percent of the vote. Support for Fianna Fail, which has ruled for the last 14 years, slumped to 15 percent from 42 percent in the 2007 election, the poll showed.

Voters punished Fianna Fail in the Feb. 25 vote after the government presided over the worst recession on record and a rescue from the European Union and the International Monetary Fund in November. Fine Gael leader Enda Kenny, likely to become prime minister, wants to re-negotiate the interest rate on the emergency loans and speed up planned spending cuts to narrow the budget gap. Labour is pushing for more tax increases.

“The two parties have been out of government for so long, they’ll be desperate to make it work,” said Kevin Rafter, a professor at Dublin City University who in 2009 published a book about Fine Gael. “It is going to be tough as policy options are severely limited.”

The parliament is due to meet again on March 9. Fine Gael won 36.1 percent of first-preference votes in the election, according to the poll carried out for Dublin-based broadcaster RTE. Labour drew 20.5 percent support in the poll, indicating it had its best-ever performance.

‘Strong and Stable’

As of 10:00 a.m. in Dublin, 131 lawmakers had been elected to the Dail, as the Irish parliament is known, according to Dublin-based broadcaster RTE’s website. Fine Gael won 59 seats, Labour 31, Fianna Fail 14, Sinn Fein 13, and the Socialist Party three. Eleven independent candidates were elected. Among those were Kenny, Sinn Fein leader Gerry Adams, Fianna Fail leader Micheal Martin, Labour Party finance spokeswoman Joan Burton and former Finance Minister Brian Lenihan.

It’s “unlikely that we will reach a majority” or be able to form a government with independent candidates, Fine Gael lawmaker Leo Varadkar said yesterday. While there might be “difficult” negotiations, a coalition with Labour would help create a “strong and stable government.”

A coalition between the two parties “is the most likely outcome,” Labour leader Eamon Gilmore said.

The new government will inherit an economy that has shrunk around 15 percent since the end of 2007 while unemployment has tripled to 13.4 percent. At the same time, it will have to deal with a budget deficit that widened to 32 percent of gross domestic product last year after tax revenue slumped and bank- bailout costs soared.

“This country is in receivership,” said Ruairi Quinn, former Irish finance minister with the Labour Party. “Fianna Fail has destroyed the sovereignty of the Irish economy, we are going to have hard times ahead and let nobody be under any illusion to that, we need a large broad majority government.”

‘Severe Hammering’

Against that backdrop, Fianna Fail may win about 20 seats, down from 78 in 2007. Lenihan told RTE after being re-elected that the party had taken a “severe hammering.”

“It’s very regrettable that the party has lost the amount it has lost,” he said. “Clearly people were anxious to see a change. The financial crisis is a very serious one.”

Fianna Fail’s defeat has some parallels in recent political history. In Japan, the Liberal Democratic Party enjoyed a half a century of almost unbroken rule before losing power to the Democratic Party of Japan in 2009. In Canada, the Progressive Conservatives was almost wiped out in 1993 when it lost all but two of its 151 seats. The reconstituted Conservative Party didn’t win back power until 2006.

“I never thought I’d see the day when Fianna Fail, which has dominated politics in Ireland virtually since the foundation of the state, should now be in meltdown,” Joe Costello, a Labour member of parliament, told reporters at the count center in Dublin. “They have been savaged.”

To contact the reporters on this story: Dara Doyle at ddoyle1@bloomberg.net Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

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