Burning Investors Pays Political Dividend in Sinn Fein Campaign
Gerry Adams, president of Irish nationalist party Sinn Fein, is selling a clear message ahead of Ireland’s election this month: burn the bank bondholders and send the International Monetary Fund home.
His stance appears to be winning voters, at least according to opinion polls ahead of the Feb. 25 vote. Sinn Fein, the political wing of the Irish Republican Army before the group laid down its arms, may double support to about 14 percent. That leaves it vying for third place with Fianna Fail, the party in government and the lightening rod for Irish ire over the country’s financial demise.
“Given the anger out there, it’s resonating,” said Diarmaid Ferriter, a historian and author of “The Transformation of Ireland: 1900-2000.” “The party is no longer as demonized as it once was, because of the peace process and the end of the IRA’s campaign.”
Ireland’s 85 billion-euro ($115 billion) bailout from the IMF and European Union is at the center of the political fight after the governing coalition collapsed last month and Prime Minister Brian Cowen was forced to call an election.
While the parties leading the polls, Fine Gael and Labour, say they will seek to renegotiate the interest rate on the package of loans and reduce protection for bank bondholders, bearded Belfast native Adams wants to walk away from the accord.
“This government shouldn’t have gone near the IMF or the EU,” Adams, 62, who was imprisoned in the 1970s for republican activities, said in a Feb. 3 interview. “But they did and they did a bad deal when they did it. We can’t afford it.”
Adams, one of five Sinn Fein lawmakers from Northern Ireland elected to the British parliament, was speaking in Dundalk across the border in Ireland where he’s seeking to win a seat in the Dublin parliament for the first time.
While Sinn Fein representatives decline to take up their seats in the U.K. parliament in protest of having to swear allegiance to the monarchy, Adams resigned last month as the member representing Belfast West. He won 71 percent of the vote in that constituency in the British election on May 6.
Sinn Fein holds a seat in Louth-East Meath, which includes the town of Dundalk, in the Dail, the Irish parliament. The incumbent lawmaker, Arthur Morgan, is stepping down.
“They are going to be able to fight our corner, while the other parties will just sell out,” said Paul Mackin, 39, an unemployed voter from Dundalk. “Times are tough right now. I’ve been looking for work, but I can’t get it.”
Adams and his party are proposing to take 7 billion euros from the country’s Pension Reserve fund to create jobs after the Irish unemployment rate almost tripled in three years and stood at 13.4 percent last month. The party also wants to increase taxes on the wealthy, while Adams said he wants to “burn” some bank bondholders by paying them less.
Anglo Irish Bank Corp., taken over by the government two years ago, said it expects to post a pretax loss of about 17.6 billion euros for 2010, the largest in the nation’s history.
Sinn Fein’s rhetoric may help steer the campaign.
During a debate with party spokesman Pearse Doherty on Feb. 7, Irish Finance Minister Brian Lenihan said the government is pressing for a “substantial discount” on 20 billion euros of unsecured senior bank bonds, less than two weeks after he said in parliament that the idea of reneging on senior bank bonds is akin to “torching” a house. Under terms of the bailout, Ireland agreed to pay back holders of senior bank bonds.
Fine Gael and the Labour Party are pushing for EU approval to impose discounts on senior bank bondholders. The two lead Fianna Fail by a combined 40 percentage points, according to a Sunday Business Post poll published on Feb. 6.
Sinn Fein’s plan for spurning the bailout would have “devastating” consequences for the country, Micheal Martin, leader of Fianna Fail, told reporters on Feb. 2. A former foreign minister, Martin replaced Cowen as leader last month.
“Gerry needs to be asked where we are going to get 50 billion euros to pay teachers, nurses and police,” Martin said.
Any electoral gains by Sinn Fein may raise concern about the future of the bailout, said Bob Janjuah, the co-head of cross-asset allocation strategy at Nomura International Plc.
“One of the things we are most concerned about is the prospects that Sinn Fein could form a large bloc in the new parliament,” Janjuah said on Bloomberg Television’s “Inside Track” with Erik Schatzker on Jan. 24. “The Sinn Fein push in Ireland is to say ‘no’ to Brussels, is to ask the banks to default and put the national interest first, which may be misguided but it’s a fear for the market.”
The extra yield investors demand to hold Irish 10-year bonds rather than German securities of similar maturity almost quadrupled to 568 basis points in the past year. The spread over German debt is more than nine times the average of the past decade, data compiled by Bloomberg show.
The government sought the bailout as investors shunned the country’s bonds on concern the cost of rescuing the financial system was surging.
“They said they were bounced into it,” said Adams. “You can’t be bounced by these big boys, you have to be able to stand up for yourself.”
Adams took over as president of Sinn Fein in 1983, the year he first won election to Westminster. He led the negotiations with former U.K. Prime Minister Tony Blair as the IRA decommissioned its weapons in 2005 and pledged to pursue its goal of a united Ireland peacefully.
Sinn Fein supported the IRA during a three-decade long conflict in Northern Ireland that caused 3,500 deaths. It largely ended in 1998 with a U.K. and Irish government-brokered peace deal. Adams was interned without trial first in 1972 and never convicted. Some voters can’t accept him.
“Adams standing here, that makes me angry,” said Kevin O’Callaghan, 60, who runs a butcher’s shop in Dundalk. “I don’t like the violence that he was associated with.”
Sinn Fein may win between 15 and 20 seats in the 166-seat parliament, polls show. Some 84 percent of people want the new government to renegotiate terms with bondholders of the country’s banks, according to a survey of 1,022 adults, conducted in Ireland on Jan. 26 and Jan. 27 by Dublin-based market research firm Millward Brown Lansdowne.
“Fianna Fail sold us out, we shouldn’t be responsible for the bankers and the bondholders,” said Peter Callan, 46, a taxi driver in Dundalk, which has a population of about 35,000 people. “If I put a bet on and I lose, I can’t go back and get my money back. Why should it be different for bondholders? Sinn Fein is the best to stand up for the country.”
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