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