Kenny’s ‘Lethal Injection’ Omen Spurs Irish Treaty Support

Irish Prime Minister Enda Kenny may succeed where other European leaders have failed: persuading voters to back austerity.

As the campaign intensifies before the May 31 Irish referendum on the European Union’s new, tighter budgetary rules, polls show backers of the treaty keeping their lead. Kenny’s warnings that rejecting the treaty would cut the country off from future bailout funds are gaining traction, even as opponents called his comments scare tactics.

“I am going to vote ‘yes’ because we need the money and I don’t see us getting it anywhere else,” said Dermod O’Byrne, 60, speaking close to the General Post Office in central Dublin, the epicenter of the 1916 rebellion against British rule. “It is better to be going with Europe than against it.”

Irish support for the so-called fiscal compact would buttress German Chancellor Angela Merkel’s austerity plans after voters in France and Greece this month rejected more spending cuts. While Ireland’s emergency loans are due to end at the end of next year, Kenny told parliament on May 8 that rejecting the treaty risks a “lethal injection” to the economy.

Finance Minister Michael Noonan said at Bloomberg Link’s Ireland Economic Summit in Dublin on May 16 that no other country in Europe could win popular backing for the treaty right now amid a backlash against austerity.

“I am quietly confident that the yes side will get it,” said Peadar Kirby, a politics professor at the University of Limerick. “One might argue this is the politics of fear but it is also the politics of reality.”

Expectant Market

Irish backers of the treaty maintained their lead over opponents, a poll for Dublin-based bookmaker Paddy Power Plc showed today. Excluding voters who are still undecided, 62 percent of respondents supported the treaty, while 38 percent opposed it, according to the survey conducted by research company Red C on May 14-16. A separate poll for the Irish Independent published yesterday had 60 percent in favor and 40 percent against the compact.

The yield on Irish October 2020 bonds climbed two basis points today to 7.38 percent. While Irish borrowing costs have risen as the Greek political crisis unfolded this month, it’s still about half the euro-era record of 14.1 percent in July.

“The referendum has been pushed off center stage by events elsewhere,” said Fergal O’Leary, a director at Dublin-based fixed-income securities firm Glas Securities. “If it’s a ‘yes,’ we may see a small relief rally. If it’s a ‘no,’ then we are back in the eye of the storm.”

Needing Support

Europe will find it difficult to offer any concessions to the country if voters reject the treaty, Lorenzo Bini Smaghi, a former European Central Bank executive board member, told Dublin-based Newstalk radio today.

Ireland has “got a lot of money from the rest of Europe” and without ECB support the country’s banking system would collapse, he said in an interview.

The fiscal compact requires nations to virtually eliminate structural deficits, creates an “automatic correction mechanism” and enshrines the new measures in national law. Kenny’s opponents say that further budget tightening will only worsen unemployment, which currently stands at 14.3 percent.

John O’Reilly, a 26-year-old construction worker who has been jobless for a year, is among those yet to decide.

European Grip

“It feels as if they are trying to push us into something,” said O’Reilly, who is considering joining the French Foreign Legion. “Europe have got a grip on us now, we don’t have our independence anymore.”

The jobless rate tripled after Ireland’s decade-long property boom collapsed in 2008 and the economy contracted by about 15 percent. Ireland is 75 percent of the way through a program of 33.4 billion euros ($42 billion) of budget cuts.

“This is like being offered a ticket to the Titanic and saying if you don’t get your ticket now, you are going to miss the boat,” Declan Ganley, leader of the Libertas group, which led the opposition when Irish voters rejected the Lisbon Treaty in 2008, told reporters in Dublin on May 15.

If Kenny can convince voters that tougher budget measures are the way forward and push the treaty through, his success will stand out in Europe.

Voters in France elected Francois Hollande as president on May 6 after he pledged to soften austerity measures, with his victory following the ouster of leaders in Portugal, Italy, Spain, Slovenia and Slovakia during the past 15 months. Kenny came to power in March last year after ousting the previous Irish government in elections.

Greek Voters

In Greece, electoral gains by the biggest anti-bailout party created political deadlock in Athens and reignited concerns the country will leave the euro.

“There isn’t a country of the 17 euro countries at present who could carry this in a referendum, there isn’t a single country bar Ireland,” Noonan said in Dublin on May 16. “If we can carry this that will send a signal out to Europe.”

Ireland is aiming to re-enter international debt markets by the end of the year, and Kenny has described the vote as more important than the general election.

Kenny took over from Brian Cowen, who suffered the first significant setback to his administration when he lost the Lisbon referendum, before it was passed in a re-run a year later. Kenny’s only experience in government previously was as tourism and trade minister between 1994 and 1997 and a junior education minister in 1986 to 1987.

“Kenny seems to have a certain energy, enthusiasm and optimism which to some extent transferred across the country,” said Eoin O’Malley, a politics lecturer at Dublin City University. “It is remarkable because none of us would have guessed he would have been good at this.”

To contact the reporters on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net Colm Heatley in Belfast at cheatley@bloomberg.net

To contact the editor responsible for this story: Dara Doyle at ddoyle1@bloomberg.net

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