Eyjafjallajökull One Year On

Like Z-list celebrities, volcanoes are often more infamous than famous. Vesuvius, Krakatoa, Etna: all owe their household name status to the destructive force of their periodic eruptions. Last year, another, more difficult to pronounce name entered the pantheon of volcanic infamy – Eyjafjallajökull.

The Eyjafjallajökull glacier, in south-west Iceland, had been dormant for some 200 years when on, April 13 2010 it erupted for the second time in less than a month. The first explosion, in late March, measured just a 1 on the Volcanic Explosivity Index (VEI) but was so powerful that it ripped a 1km-long fissure in the ice-sheet, spewing basalt lava, which streamed in rivers creating awesome lava falls.

But is it the second phase of Eyjafjallajökull’s eruption that everyone will remember. Registering 4 on the VEI, it was one of the biggest ever recorded in Iceland – and one of the most disruptive. A plume of ash, estimated at some 300 million cubic metres, was sent around 11km into the earth’s atmosphere, bringing chaos to our skies as aviation authorities struggled to access the risk for air travel.

The closure of much of Europe’s airspace between April 15 and 20 was the largest disruption of air travel since the Second World War. ‘I hate Iceland,’ one grounded Scottish tourist memorably roared at a television crew vox-popping disgruntled would-be passengers in one British airport.

For Icelanders, however, volcanic activity is simply part of life in the land of fire and ice. While scientists from around the world continue to monitor the island’s myriad volcanic sites, famers living in the shadow of the spectacular Eyjafjallajökull glacier have, for centuries, used a rather more traditional method to detect ashfall. Each night a white plate is placed next to the main door to the farmhouse: if, next morning, the plate is black with dust and ash then has been an eruption somewhere in the vicinity.

‘This is a volcanic island, there is activity, it’s just a fact of life,’ Heather Millard, a documentary film-maker, originally from Cambridge now living Iceland, explained to me in a café in downtown Reykjavik recently.

Millard is currently working on ‘Ash: Aftermath Under the Volcano’, a film following the lives of three Icelandic families living in the ferocious shadow of Eyjafjallajökull. ‘People by the volcano are still really worried,’ she says. ‘One of the famers’ wives has recurring nightmares of lava coming towards here.’

Arguably the most surprising aspect of last year’s eruption was not the force and scale of the explosion and its aftermath, but that it happened at Eyjafjallajökull and not Mount Hekla.

Located in the south of Iceland, Hekla is overdue a major eruption. Nicknamed the ‘Gateway to Hell’ in the Middle Ages, the effects of an eruption at Hekla could be far more devastating than anything witness last year: many historians trace the roots of the 1848 revolutions that swept across Europe to a series of massive explosions here in 1845 and 1846 that led to crops across the continent being ruined.

Given increasingly levels of global uncertainty about resources and climate change, another massive eruption could have equally sweeping effects.

Iceland's no vote on Icesave was a public display of anger

Which way now? The neoliberals who created the bubble are resurgent, but many Icelanders want to move away from finance. My analysis from the Guardian’s Comment is Free.

Even before the final result was in, the tenor of national and international reaction to the Icelandic public’s latest rejection of a deal for Icesave was crystal clear. “We must do all we can to prevent political and economic chaos as a result of this outcome,” prime minister Johanna Sigurdardottir said early yesterday morning. Around the same time, at the Treasury in London, Danny Alexander warned that the British government would see Iceland in the international court.

In all likelihood, the UK government will eventually claw back the £2.35bn lost when it stepped in to guarantee British depositors’ cash in Icesave accounts, but the “see you in court” rhetoric from Westminster won’t go down well in Reykjavik. Many Icelanders still hold the then prime minister Gordon Brown responsible for worsening the crisis (or kreppa as it’s known in Iceland) when he decided to use anti-terrorism laws to freeze the assets of Icelandic banks in the autumn of 2008.

Despite arguments to the contrary, the size of the Icesave debt owed by the Icelandic government is relatively small – even for a country of just 320,000 people. A sale of assets belonging to Landsbanki, the bank that created Icesave, will provide much of the cash to reimburse the British and Dutch governments. Indeed, earlier this year an independent report estimated that the Icelandic people might be on the hook for as little as £125m (or as much as £1.5bn, still a minor sum compared with other government debts).

The main motivating factor behind Saturday’s no vote was anger, not economics. Icesave has become a psychological symbol of the collapse for many Icelanders, a visceral reminder of how much they lost but also of the international community’s role in the kreppa. Vast swaths of the Icelandic public remain wholly opposed, not unreasonably, to the notion that their government should be responsible for the debts of private banks in global markets.

Last week, a cartoon in the newspaper Morgunblaðið depicted Iceland as a weak child in a playground been beaten up by three bigger boys. The names on their hoodies? Standard, Poor and Moody – in reference to the companies who have been rating European countries’ creditworthiness.

The strongest political opponents of the Icesave deal were the very neoliberal voices responsible for Iceland’s economic collapse in the first place. The editor of Morgunblaðið, which spearheaded the campaign against the vote, is none other than former prime minister and ex-head of the central bank, David Oddsson. As head of the rightwing Independence party, Oddsson, a Milton Friedman acolyte, privatised the nation’s banks – with disastrous consequences.

When the crash came, the total debt of Iceland’s three privatised banks was almost 10 times the GDP. Most ordinary Icelanders are still paying off massive debts on houses, cars, university degrees and much else.

Yet, less than two and a half years later, the centre-right Independence party is enjoying a resurgence. Defeated in the 2009 general election for the first time in its history, the party is now polling around 40%, while Jóhanna Sigurðardóttir’s coalition of Social Democrats and Left-Green representatives’ grip on power looks increasingly precarious.

The neoliberal dogma that turned Iceland into the world’s biggest hedge fund hasn’t gone away, but at the same time many Icelanders would like to see their country move away from finance and aluminium smelting and become the world’s first fully sustainable society. It certainly is possible: Iceland has fishing rights to 1% of the world’s stock, produces more energy per capita than just about any nation on earth and has a long history of self-preservation.

As the first anniversary of the eruption at Eyjafjallajökull draws near, the dust is finally beginning to settle on Icesave. Now the battle for Iceland’s social and political future really begins.

Public anger is understandable but there will be a price to pay

In MANY respects, a lengthy legal battle over the Icelandic public’s latest rejection of a deal for Icesave is the least of the country’s worries.

Finance minister Steingrímur Sigfússon was at pains to stress yesterday that the “no” vote will not affect Iceland’s application to join the EU.

But the result has placed a huge diplomatic strain on relations with European neighbours, just as
country is trying to move out of self-imposed international isolation.

There will be economic ramifications, too. Ahead of the vote, credit rating agency Moody’s warned a rejection of the deal would see the status of Icelandic debt further downgraded. Although Iceland is expected to return to growth in 2011, a downgrade could have a serious impact on the country’s short-to-medium-term economic prospects.

The latest Icesave deal was a significant improvement on that rejected by 93 per cent of voters last March. The interest rate was reduced from 5.5 per cent to 3.3 per cent and the country would have had until 2046, not 2024, to complete repayments. However, vast swathes of the Icelandic public remain wholly opposed, not unreasonably, to the principle that their governments should be responsible for the debts of the country’s private banks, in this case Landsbanki and its internet arm Icesave.

Two and a half years on, public anger at the role of the political classes and the international community remains high. The government in Reykjavik, a coalition between Social Democrats and the Left-Green movement, is unpopular and might not survive this latest reversal. The fact that the British government is Icesave’s major creditor did not help the “yes” cause, either. The decision by Gordon Brown to use anti-terrorism laws to freeze the assets of Icelandic banks after the 2008 crash is still a source of bitterness.

This latest “no” is not necessarily the end of the world for Iceland. It has fishing rights to 1 per cent of the world’s stock, produces more energy per capita than just about any nation on earth and has a long history of self-preservation. But it will need to harness all this – and reject the neo-liberal dogma of a resurgent Independence Party – to get back on its feet.

This article appeared in the Scotsman 10 April

Iceland still divided over deal to repay UK for online bank losses

By Peter Geoghegan
in Reykjavik

Public opinion in Iceland is split over a deal to repay the British government £2.35 billion for losses incurred following the failure of online bank Icesave.
Icelanders will vote on the issue in a referendum on Saturday, with opinion polls suggesting the result is too close to call.

A recent survey for Icelandic business weekly Vidskiptabladid put support for the new Icesave legislation at 52 per cent, with those opposed to the deal on 48 per cent.

A significant number of Icelanders are still undecided. In March 2010, an earlier agreement on Icesave was rejected by over 90 per cent of voters.

Icesave, a high-interest internet bank with the slogan “clear difference”, was created by one of Iceland’s largest banks, Landsbanki, in 2006. It operated in both the UK and the Netherlands, with over 400,000 customers in the two countries.

When the global downturn struck in October 2008, Lansbanki, along with two other banks, Kaupthing and Glitnir, were declared bankrupt. The total debts of the three banks, which were privatised in the late 1990s, was almost ten times Iceland’s GDP.

As Landsbanki collapsed the UK government stepped in to guarantee British depositors’ money. The Netherlands did likewise. Under the terms of the subsequent International Monetary Fund bailout, Iceland’s government agreed to accept a degree of taxpayer liability for the losses incurred in reimbursing Icesave customers.

Saturday’s vote comes after a deal was reached between the Icelandic government and their counterparts in London and the Hague was passed by Iceland’s parliament, the Altingi, but president Ólafur Ragnar Grímsson refused to ratify the bill, which would see Iceland repay over £3.6bn.

Speaking to The Scotsman in Reykjavik, Iceland’s finance minister Steingrímur J Sigfússon was cautiously optimistic the referendum will be passed. “It’s a lot to demand of the public to say “yes” to such an such an obligation but it’s something we have to do,” Mr Sigfússon said.

Not all Icelanders agree. Gisli Palmason, who runs an outdoor centre in Iceland’s remote Westfjords region, believes that the Icelandic government should not foot the bill for the failure of the country’s private banks.

The new deal is a significant improvement on the one rejected last year. Where Iceland was formerly asked to pay back its debt at a 5.5 per cent interest rate between 2016 and 2024, it now has until 2046 at a rate of 3.3 per cent.

A “no” vote would greatly strain relations between Iceland and Europe. It could also hinder the projected return to economic growth in 2011 as credit rating agencies downgrade the status of Icelandic debt.

Even if the referendum passes, the amount that the Icelandic government will pay is uncertain. The proceeds of a sale of Landsbanki’s assets, currently under way, will go towards repaying the British and Dutch governments.

However, it is estimated that the government will still be anywhere from £125 million to £1.5bn short.

This article first appeared in the Scotsman 7 April

Northern Ireland analysis: Ways to take the sting out of dissidents' tail

THE fatal attack in Omagh was deeply shocking but, in its own way, all too predictable. The chief constable of the PSNI, Matt Baggott, has spent much of the last year warning of the threat dissident republicans pose to his officers – much to the chagrin of many in Stormont, most notably Sinn Fein.
Indeed, just six weeks ago it was confirmed that Northern Ireland’s police service would receive an additional £200 million over the next four years to combat terrorism.

Dissident republican attacks have escalated sharply in the last two years. The killing of Ronan Kerr follows a series of failed attacks on the police across the north. In one such attack, in August, a 200lb car bomb was left outside the Strand Road police station in Derry.

No group claimed responsibility but it is almost certainly the work of one of the Real IRA, Óglaigh na hÉireann or the Continuity IRA.

Both the timing and the target of the latest attack are significant. Ronan Kerr was a Catholic born and raised in Omagh. Dissidents have targeted Catholic officers in an attempt to dissuade youngsters from joining the force. In January of last year, Peadar Heffron a well-known Gaelic sports player and police officer, lost his leg when a bomb placed under his car exploded.

Saturday’s attack is also part of a wider attempt to disrupt the Stormont elections, which are due to take place on 5 May. Paradoxically, the main beneficiaries of renewed violence are likely to be Sinn Fein – which can claim to represent non-violent republicanism – and extreme elements in the Democratic Unionist Party and the hardline Traditional Unionist Voice.

Although political parties aligned to dissident republicans are unlikely to win any seats in the Northern Ireland Assembly, there is evidence that these groups do enjoy a modicum of support. Last year, researchers from the University of Liverpool found that 14 per cent of northern nationalists sympathised with dissidents.

In the long-run, successfully tackling the dissident threat requires investment and jobs for these young people. Right now we can only hope that, just as in 1998, the car bomb attack in Omagh will lead to a backlash against those who want to drag Northern Ireland back to the dark ages.

This article appeared in the Scotsman 4 April

Old certainties gone for new writers

My review of New Irish Short Stories, edited by Joseph O’Connor from the Sunday Business Post.

Last February, Irish novelist Julian Gough was at the centre of a literary spate about the state of contemporary Irish fiction.

In comments published on his personal blog, and later picked up by the Guardian online, the Berlin-based writer railed against the ‘‘pompous, provincial literary community’’ back home.

‘‘Just when we need a furious army of novelists, we are getting fairly polite stuff published by Faber and Faber that fits into the grand tradition,” he said.

New Irish Short Stories is the third instalment in a well-established series from the same venerable London publisher bemoaned by Gough – so is this latest collection of new Irish writing more ‘‘fairly polite stuff’’, or a fiery, visceral rejoinder to the state of chassis we currently find ourselves in? The answer, almost inevitably, is a bit of both.

New Irish Short Stories follows up well-received collections of the same name that covered 2004-5 and 2006-7, both edited by the Late David Marcus, a titan of the Irish literary scene responsible for over 30 short story anthologies.

New editor Joseph O’Connor has preserved many of Marcus’s traditions, maintaining gender balance, as well as plenty of Northern voices. O’Connor has also adopted a pleasingly catholic conception of Irishness that allows for the inclusion of the likes of Richard Ford and Rebecca Miller, alongside established Irish authors and emerging writers.

While Marcus’s first two collections dealt largely with an affluent Celtic tiger nation – with stories set everywhere from Peru to Tuscany, and scant references to those twin pillars of Catholic Ireland, the Church and the GAA- this volume is loosely rooted in Ireland’s current crisis.

The cover features a panoramic glimpse of the Samuel Beckett Bridge in Dublin’s docklands at dusk, framed by cranes and half built office blocks; as O’Connor caustically notes in his brief introduction: ‘‘Old certainties are shattered.

We got fooled and we know it.” Crisis, in all its forms, threads its way through several of the stories included here: the global financial crash provides the backdrop for Joseph O’Neill’s slight tale of a New York highflyer in Italy, while it is an altogether more personal crisis of meaning that drives the anonymous protagonist in Philip O’Ceallaigh’s blistering The Fuck Monkey.

The global character of many Irish lives, and writers, is well represented. There are contributions from Bucharest, New York and Canada, stories set everywhere from Llandudno and London to Minnesota and Manhattan.

But some of the strongest pieces are suffused with an ethereal placelessness that mimics the disorientation of modern Ireland without seeking to faithfully reconstruct it in realist prose.

Crisis and confusion resonate throughout The Blacklight Ballroom, Peter Murphy’s powerful, dystopian vision of the future, set in a cashless society ‘‘nearly a year into the civil war that no one cared to declare a civil war’’. Echoes of JG Ballard, Michel Faber and contemporary science fiction abound too in Eoin McNamee’s short, unheimlich tale of post-industrial Russian workers on the edge of nowhere.

Elsewhere, Frank O’Connor’s description of the short story as an ‘‘intense awareness of human loneliness’’ infuses predictably adroit, delicately crafted contributions from Roddy Doyle, Dermot Bolger, Colm Tóibín, William Trevor and Kevin Barry.

When New Irish Short Stories is good, it is great, attesting to the continuing strength of Irish creative writing.

However, a few too many sepia-tinged visions seep into the 25-plus offerings on show.

The shadows of Frank O’Connor, Sean O’Faolain, Edna O’Brien and, particularly, John McGahern hang heavy over much of the newer work, with some of the writers featured seeking solace in well-trodden tropes of Ireland past.

Whether it is the shame of poverty in the 1950s (Vic McDade’s A Gift for my Mother) or the spectre of child abuse in Elaine Walsh’s Midnight Blue, there is a cloying, over-familiar feel to such clichéd depictions of Irish life.

Thankfully, not all the emergent contributors are buried under the weight of McGahern and company.

Kevin Power, whose debut novel Bad Day in Blackrock was published to deserved acclaim in 2008, delivers a coruscating dissection of Irish politics via the medium of the 2006 student union presidential elections in an unidentified Dublin university on College Green.

Another author who is certainly not guilty of any lack of imagination is Colum McCann. At barely four pages, Aisling is the briefest contribution, but McCann’s vision of a suburban Irish housewife wrestling her demons is perfectly realised – and devilishly funny to boot.

By their very nature, multi author compendiums of short stories are often uneven, dyspeptic affairs that struggle for a coherent flow with so many different voices.

New Irish Short Stories is not helped by the rather curious decision to present the writers in alphabetical order, which results in several jarring juxtapositions of tones, topics and styles. The absence of new immigrant voices is, as O’Connor acknowledges, also regretful.

Ireland has witnessed remarkable tumult and flux over the last decade and a half.

Unfortunately, at times reading this collection it feels that, like many of us, the next generation of Irish writers is still struggling to catch up.

This article appeared in the Sunday Business Post 20 March

Analysis: Let him enjoy his day in the sun. It's going to get stormy

IF ONLY every day was as easy for Enda Kenny, as, on a bright lunchtime in Dublin, the Fine Gael leader was elected Taoiseach.
Last weekend’s ratification of the Fine Gael-Labour coalition pact paved the way for Kenny’s day in the sun, but even in victory there were signs that it will not be all smooth sailing for the new government. Criticisms surrounding the lack of detail in the parties’ programme for government abounded in a number of maiden speeches to the house.

Independent Shane Ross typified the mood: “We do not know what they are promising except that they will be the government for the next few years and they will stick together come hell or high water,” he complained.

If the coalition is to remain in power that long it will have to get used to slings and arrows from a restive opposition, buoyed by a record 19 independents.

Most of this new crop is firmly on the left of Irish politics, and it is Eamon Gilmore’s Labour party that have the most to fear in the weeks and months ahead.

Nevertheless, a deep reserve of goodwill for Mr Kenny does exist, and the new Taoiseach is likely to need all the generosity he can muster. The coalition’s programme for government, optimistically titled Towards Recovery, can best be characterised as a constructive fudge between Fine Gael and Labour policy.

This article first appeared in the Scotsman 10 March

Analysis: Familiar bedfellows must now face up to their severest test

Ireland’s recent general election was the most dramatic in the country’s history: Fianna Fáil lost almost three-quarters of its seats, the hard Left made significant gains and Gerry Adams will now sit in the Dáil as the head of the fourth-largest party in Irish politics.
But in an election of such surprises, the eventual result – a Fine Gael/Labour coalition – was hardly unexpected.

They are familiar bedfellows – they have formed coalitions six times. A Fine Gael/Labour government was widely predicted in the run-up to the election on 25 February, but the new administration is quite unlike previous coalitions between the two.

Both parties will enter government from positions of relative strength. In the past, they have often struggled to maintain the 83 seats necessary for a majority; in the 31st Dáil they will hold 113 seats.

No incoming government has ever faced such challenges, too. Unemployment stubbornly refuses to drop below 13 per cent, 1,000 people are emigrating every week and the country is struggling to keep up punitive repayments on November’s bail-out plan.

The agreed programme for government is, broadly speaking, a compromise between the two parties’ manifesto commitments. For example, job cuts in the public sector will be slightly less severe than Fine Gael proposed, but there will be no increase in the highest rate of income tax, a move favoured by Labour.

Aside from jobs, the big issue is still the toxic banking sector. The coalition has agreed to implement the austere ECB/IMF bail-out while simultaneously looking to renegotiate the 5.8 per cent interest rate on these loans. This rather contrary position seems designed to both assuage the bond markets and encourage European leaders to help Ireland out – though Taoiseach Enda Kenny will need to use the threat of an Irish default, a very real possibility, much more effectively if he is to succeed in agreeing with a more favourable deal.

Given the sins of the previous Fianna Fáil administration, the new government can expect an elongated honeymoon period in office. But if the economic situation has not improved in two years’ time, both Fine Gael and Labour could suffer.

This article first appeared in the Scotsman 7 March

#ge11 – The roadtrip analysed

I spent election day 2011 in the company of Mick Fealty from Slugger taking a roadtrip around Ireland as part of RTE’s election coverage. Here’s what we found:

As former US Senator Tip O’Neill once quipped: ‘All politics is local’. The election campaign was dominated by national issues – jobs, emigration, the economy – but what were the big concerns for voters in their local areas? On polling day, Peter Geoghegan and Mick Fealty hit the road to meet voters and find out what were the main issues in three very different constituencies: Cavan Monaghan, Roscommon South Leitrim and Carlow Kilkenny.

2011 was Ireland’s first bona fide internet election – and what better way to get the pulse of the nation than to combine new media and old-fashioned, shoe-leather journalism in a cross-country Election Day road-trip. Three Facebook pages, thirty tweets, fourteen audio boos, nineteen hours and 433km later, we understood a lot more about what motivated voters in Cavan, Roscommon and Kilkenny on 25 February.

Even on polling day, Cavan was still waking up when we rolled into town just after 8am. Luckily the group of candidates, voters and activists, convened online and in person, were anything but sleepy: with unemployment and emigration rising sharply, the local economy and jobs dominated the lively Cavan meet-up.

Northern Ireland is barely 15km away; many wondered whether politicians in Dublin understood the reality of living on the border. The planned 2% hike in VAT, which could damage the already fragile job market in the constituency, was cited as evidence of the government’s failure to understand the border region’s economic needs. There are also some acid feelings about the Government’s clunky job creation strategy in the small business sector.

Next stop Roscommon – though not before lunch on the go whilst driving through Co Longford. If you think the ghost estates are a media myth, take the winding, dyspepsia-inducing road from Cavan to Longford. Here bleak, empty housing estates are all too real, and are just one reason why local people in rural Ireland did not take Fianna Fáil’s line that the country’s woes were all caused by Lehman Bros.

All politics is local – but in Ireland campaigning can even be hyper local. On the Roscommon side of Athlone, failed Fianna Fáil candidate Ivan Connaughton even had a special election poster made up for local GAA club St Brigids, who play Crossmaglen on St Patrick’s Day in the All Ireland Senior Club Championship. The importance of local issues was lost on few candidates, even if showing concern for them was no guarantee of success.

Ten years ago a road-trip around Ireland would have lots of bumpy roads, traffic jams and long journey times, but this around it was all, well, bumpy roads, traffic jams, and long journey times. Ireland’s new motorways don’t help you much if you’re traveling between Cavan, Roscommon and Kilkenny – and these poor travel times are one of the main reasons why local folk would rather be treated in a community hospital, like in Roscommon, than take their chances on the road to a centre of excellence in Galway.

With the good ship Fianna Fáil punctured well below the waterline, the best survival strategy for many candidates in General Election 2011 was to pretend you hadn’t been part of the Government. Only two out of six Fianna Fáil TDs whose patches we traveled through survived polling day. John McGuinness did so by resigning from Cowen’s cabinet, stripping out all traces of Fianna green. Don’t knock it because it seems to have worked!

The primacy of the county boundary in Ireland’s electoral system was a recurring theme. TDs are expected to fight their county’s corner in Dublin, to bring benefits back home for local voters even at the expense of the wider national interest. Leitrim, for example, was sliced in two after 1997 and now has no TDs in the 31st Dail – a fact predicted, and greatly resented, by the populous of that county. Even in prosperous Kilkenny there were complaints about public jobs going to Carlow, and dismay that the new road was simply enabling communities further to the south.

Traveling through Ireland on polling day 2011, we found a strong degree of skepticism regarding the capacity of Government to deal with the macro issues facing it. Unfortunately, many voters were equally uncertain about the possibilities of local-level issues improving in the near future, too.

Online conversations about local politics are still few and far between, those that there are tend to focus largely on national rather than local issues. However, Twitter and Facebook did enable us to organise three groups of ten to twenty people in each constituency in just three days. Thanks to these groups we learned much about the issues affecting local voters – as well as the perils of trying to drive over 400km across Ireland in a single day!

-Mick Fealty & Peter Geoghegan

Coalition partners hammer out deal on Ireland's future

Fine Gael and Labour will form a coalition government in Ireland following the ratification of a draft programme for government by a special Labour Party delegate conference in Dublin yesterday. Separately, the Fine Gael parliamentary party unanimously endorsed the proposed programme.
After six days of talks, including lengthy meetings between Fine Gael leader Enda Kenny and Labour’s Eamon Gilmore, the parties have agreed a raft of measures to tackle Ireland’s on-going economic difficulties.

Among the 64-page document’s most eye-catching proposals are the break-up of the department of finance into two bodies, one dedicated to public expenditure and the other public sector reform, and the establishment of an economic council within government to demand a renegotiation of November’s €85 billion (about £73bn) bailout.

Brendan Howlin, one of Labour’s most senior negotiators, said that renegotiating the EU/IMF rescue package was a key task for the new government.

He said: “We have to repair broken bridges across our European partners, to build up an understanding of our position. It’s in everybody’s interests, not only the national interest of Ireland, but in Europe’s interest and in the interest of maintaining the euro, that we have a path that is sustainable out of the economic hole we find ourselves in now.”

The two parties have also reached compromises on a number of major policy issues, including public sector reform. During the election campaign Fine Gael pledged to cut 30,000 public sector jobs by 2014, while Labour said they would reduce this figure by 18,000. Under the agreed programme, 25,000 public sector jobs will be shed between now and 2015.

Fine Gael had wanted to reduce the deficit to 3 per cent of GDP by 2014, a lynchpin of the EU/IMF deal. Labour campaigned on achieving this target by 2016. The government has now agreed to bring the deficit down to 3 per cent by 2015 instead.

Both parties have described the new administration as a “national government”. But with 76 seats to Labour’s 37, Fine Gael is undoubtedly the coalition’s senior partner and the numerical superiority of Mr Kenny’s party is reflected in aspects of the new government’s proposals.

Privatisation of state assets, opposed by Labour, will continue, most likely with the sale of sale of energy companies ESB and Bord Gáis. There will be no rise in the highest rate of income tax, a Labour manifesto pledge, but the cut in the minimum wage brought in at the last budget will be reversed.

The coalition has also committed itself to cutting the number of MPs, although the Seanad, Ireland’s second house, will not be abolished as Fine Gael had proposed.

Ministers’ salaries will be cut and political expenses will have to be vouched for.

A new universal health insurance system, making it compulsory for everyone to be insured, will be introduced.

Labour and Fine Gael have been in coalition together six times in the past, but never with such a commanding majority in the Dáil. When parliament resumes on Wednesday, the coalition will hold 113 seats, against 53 on the opposition benches, led by a hard-hit Fianna Fáil.

On Wednesday, Mr Kenny will be elected Taoiseach and Mr Gilmore will become Tánaiste (deputy prime minister). Both parties have made concessions so far – they will be expected to make many more in the months and years ahead.

This article first appeared in the Scotsman 7 March