Nov. 23 (Bloomberg) -- Prime Minister Brian Cowen’s future may be played out in a corner of Ireland nicknamed the “forgotten county,” where voters will get the chance this week to show him that the country’s bailout has a political cost.
A special election for the Irish parliamentary seat of Donegal Southwest takes place on Nov. 25, four days after Cowen sought international aid. His coalition partners, the Green Party, said yesterday they will quit the government next month and independent lawmakers threatened to block his budget. Cowen responded by saying he will hold national elections in early 2011 after first trying to win backing for the budget.
“I’m angry about the situation Ireland is in,” said Brendan McGloin, 41, a self-employed sculptor in Donegal who will vote against Cowen’s Fianna Fail party, ending a lifetime of support. “I hope they get kicked out. I feel like the government has cheated us.”
Cowen, 50, has led what was the euro region’s fastest-growing economy into its worst recession on record and the potential loss of economic sovereignty 88 years after gaining independence from the U.K. The former finance minister, who stoked the boom with tax cuts and spending increases in 2006 and 2007, may struggle to stay in power as the Greens desert him.
“It would be difficult to see Cowen leading Fianna Fail into the election,” said Simon Barry, chief economist at Ulster Bank Capital Markets in Dublin. “The likely scenario is that Fianna Fail will think about having a new leader at the top.”
After earlier denials that Ireland would need help from the European Union and International Monetary Fund, Cowen was forced on Nov. 21 to ask for a package that analysts at Goldman Sachs Group Inc. estimate may total 95 billion euros ($130 billion).
Cowen defended his reversal. “I don’t accept I’m the bogeyman,” he said at a press conference that night in Dublin. “Now circumstances have changed, we’ve changed our policies.”
While Fianna Fail is second in the Donegal polls behind nationalist party Sinn Fein, the election will be first test of voter opinion on those events.
The most northerly county in Ireland, adjacent to Northern Ireland and 140 miles from Dublin, accounts for less than 4 percent of the country’s population. During the boom, holiday homes were built across the county. Prices for residential property have sunk 36 percent since 2006, according to an index compiled by Irish Life & Permanent Plc and the Economic & Social Research Institute in Dublin.
“I started business in 2004 when things were good,” said Brendan O’Donnell, 39, a real-estate developer in Donegal. “I employed 40 people. Now it’s down to me and my partner. I live on a knife edge. I hope Fianna Fail get wiped out.”
With Cowen’s majority in parliament evaporating, Donegal may help decide whether he can pass the budget, called for Dec. 7 to approve 6 billion euros of spending cuts and tax increases.
Cowen has the support of 82 lawmakers in the parliament, including six Greens and a number of independents, compared with 79 for the combined opposition. The Green party said yesterday it wants national elections in the second half of January.
Independent lawmakers Michael Lowry and Jackie Healy-Rae also said they may withdraw support for the budget.
“Ideally, they’d back the budget first and then resolve the government,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “If there’s no budget for 2011, that would put the country in a very critical situation.”
Trailing in Poll
In Donegal, the party has 19 percent support prior to this week’s election, according to a poll for Paddy Power Plc published on Nov. 17. Sinn Fein, led by Gerry Adams, is at 40 percent, according to the poll of 510 people carried out between Nov. 12 and Nov. 16. No margin of error was given.
Fianna Fail was born out of an armed independence movement that fought against centuries-old British rule in Ireland from 1916 until 1921. A treaty was signed in 1921 with the U.K. government, granting 26 of Ireland’s 32 counties partial independence and partitioning the country.
The party’s founder, Eamon de Valera, initially rejected the treaty because it didn’t grant full independence. Ireland declared itself a republic in 1949. The British government said last week it may contribute to Ireland’s rescue.
“This is our worst day and lowest day,” Ned O’Keefe, a Fianna Fail lawmaker, told broadcaster RTE on Nov. 19 as Cowen held talks with officials from the EU and IMF on the shape of a potential bailout. “We are sovereign people and blood has been lost over it. It’s said that the U.K. chancellor is now offering us money. I never believed I’d see that.”
Cowen, who was born in Tullamore in the Irish midlands, was finance minister from September 2004 until he became prime minister in 2008. Once a Gaelic football player, Cowen worked as an attorney before he was elected to parliament in 1984 in a ballot caused by the death of his father.
Cowen’s leadership went disastrously wrong for Ireland following the 2008 demise of Lehman Brothers Holdings Inc., which turned a slowdown in the property market into an implosion that engulfed the economy.
Moody’s Investors Service said yesterday a “multi-notch” downgrade in Ireland’s credit rating was “most likely” because the bailout would increase its debt burden. Banks in the country may require as much as 50 billion euros in support, the government said last month.
Bank Shares Drop
Shares of Bank of Ireland Plc, Ireland’s largest bank, fell as much as 27 percent in Dublin trading today, while Allied Irish Banks Plc, the second-largest, slid 19 percent, as concern mounted that a government bank bailout will dilute shareholders.
The lenders extended declines yesterday following comments by Matthew Elderfield, the country’s head of financial regulation, that banks may get immediate capital injections.
Irish central bank Governor Patrick Honohan said today he is “relaxed” about the idea of foreign investors taking control of Ireland’s largest banks. Foreign banks can help improve access to credit and the nation “will have a slimmed down” banking system in the future, Honohan said.
Voters aren’t happy with Cowen’s performance. National support for Fianna Fail, which has governed Ireland since 1997, dropped to a record low this month, the Sunday Business Post reported on Nov. 21. Backing for the party dropped 1 percentage point to 17 percent, the newspaper said. Fine Gael, the largest opposition group, rose 1 percentage point to 33 percent, while Labour was unchanged at 27 percent, according to the report.
“Now we have economists from Europe telling us what to do, it’s not right,” says McGloin, whose sculpting work revolves around Irish culture and mythology. “Ireland fought for its independence and it shouldn’t be given up.”
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