Irish Labour Party Leader Gilmore Resigns After Rout

Irish Deputy Prime Minister Eamon Gilmore resigned as Labour leader after a rout in local and European elections wiped out much of the party’s support amid an increase in protest votes across Europe.

Gilmore, 59, said his decision to step down won’t destabilize the coalition government, in power since 2011. The party’s executives will meet today to decide the process of choosing a new leader.

The party paid a “high political price” for policies needed to narrow the budget deficit, Gilmore said in Dublin yesterday. Labour must “hear, heed, and act” after the election on May 23, he said.

Voters punished the coalition last week and rewarded anti-austerity parties including Sinn Fein after enduring years of spending cuts and tax increases. Under a new leader, Labour may seek a reduction in the 2 billion euros ($2.7 billion) of austerity measures planned for 2015.

“We’ll need some sort of compromise involving a step to the left and a loosening of the fiscal purse strings,” said Owen Callan, a Danske Bank A/S analyst in Dublin. “There’s a clear danger that doesn’t happen, and we get government collapse and snap elections.”

Labour won 51 seats in the local government elections, according to national broadcaster RTE. In 2009, the party won 132 of 883 seats. The party, which traces its roots to the Irish trade union movement in the early 20th century, has yet to win any of Ireland’s 11 seats in the European Parliament after taking three in 2009. Counting is still underway.

Possible Contenders

Social Protection Minister Joan Burton and Expenditure Minister Brendan Howlin are among the favorites to take over as Labour leader, bookmaker Paddy Power Plc said. The choice of future leaders will be done “fairly quickly,” Labour lawmaker Emmet Stagg said on RTE yesterday.

“While some tweaks of the government program and a cabinet reshuffle are likely to follow, both parties have been consistent on the core policies they believe are needed to put the economy back on the right track,” said Philip O’Sullivan, an economist at Investec Plc in Dublin. “The coalition has almost two years to regroup.”

From Galway in the west of Ireland, Gilmore became party leader in 2007. A student activist, he was first elected to parliament in 1989 and served as marine minister in the 1990s. In the 2011 general election, Gilmore led Labour to its best-ever performance, promising to put a brake on austerity.

Frankfurt’s Way

During the campaign, Gilmore said that voters faced a choice between “Frankfurt’s way or Labour’s way.” In government, he largely implemented the cuts under the international bailout. Between 2012 and 2015, the coalition is looking for spending cuts and tax increases of about 12 billion euros to bring the deficit under the European Union target of 3 percent of gross domestic product.

The yield on Ireland’s 10-year benchmark bonds has fallen 6.63 percentage points to 2.71 percent since Fine Gael and Labour took power in 2011. The government exited the bailout program in December.

Finance Minister Michael Noonan said today that he regretted Gilmore’s resignation. Asked if it’s possible to lessen the planned austerity, Noonan said “we’ll see.” He doesn’t have much discretion because the country has to meet deficit targets set by the European Commission, he said.

Gilmore “has assured me that Labour remains fully committed to providing stable governments,” Prime Minister Enda Kenny said in an e-mail. Labour made decisions that “pulled Ireland back from the brink of economic collapse.”

Gilmore joined his counterparts at other mainstream European parties in coming under pressure. U.K. Deputy Prime Minister Nick Clegg rejected calls to quit after his Liberal Democrats were almost wiped out in European Parliament elections. Spain’s main opposition party, the Socialists, lost almost half its support in the polls, prompting the resignation of leader Alfredo Perez Rubalcaba.

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