Kenny Dashes to Washington to See Obama as Irish Deadlocked

  • Irish prime minister meets president around St. Patrick's Day
  • Efforts to form government will ramp up in coming weeks

Irish leader Enda Kenny meets U.S. President Barack Obama in Washington on Tuesday to hand over the traditional bowl of St. Patrick’s Day shamrock. It could be the last time he makes the trip.

Kenny travels as caretaker prime minister after losing his majority in last month’s general election and is cutting his trip back to just one day as efforts to form a government intensify back in Dublin. He’ll also meet Vice President Joe Biden and House Speaker Paul Ryan.

With no single party able to command a majority, Kenny still has a chance to win a new term if he can persuade his rivals to back him. His party, Fine Gael, has said it’s open to discussing an unprecedented grand coalition with its traditional enemy Fianna Fail as threats to the euro-region’s fastest growing economy mount.

“It is inevitable that Fine Gael and Fianna Fail will enter discussions,” said Ryan McGrath, head of fixed-income strategy at Cantor Fitzgerald LP. “Failing any agreement we are heading for another general election but it will not be until at least the second week of April before we get any clarity. ”

Potential Combinations

Lawmakers may not vote on a prime minister until April 5 and talks will probably go on for many weeks, according to minsters. There are three alternative outcomes:

  • A grand alliance between the two parties, probably the only recipe for a stable government
  • Fianna Fail props up a minority Fine Gael administration -- that could be short-lived
  • Talks fail and Ireland faces another election

As yet, investors have remained relaxed. Ten-year Irish bonds yielded 0.85 percent on Tuesday, narrowing the spread between benchmark bonds and German securities of a similar maturity to 59 basis points from 83 basis points just before the Feb. 26 election. Moody’s Investors Service said on Tuesday that it expects the nation’s debt ratio to fall, as the economy continues to grow rapidly.

Late on Friday, ratings service DBRS Inc. upgraded Ireland’s long-term credit rating to A high from A.

“Although the results raise the likelihood of a hung parliament or the formation of a weak coalition, all major parties, have promised to respect Ireland’s budget rules, ” DBRS said on Friday. “Regardless of the composition of the next government, the overall direction of macroeconomic policy is unlikely to change.”

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