Dublin’s government is on a knife-edge. Damaged Prime Minister Brian Cowen has rebuffed calls for a snap election and insisted the budget would go ahead as planned on Dec. 7 in the national interest before he calls an early poll.
But opposition parties, demanding an immediate dissolution of parliament, refused to give assurances they would support the budget or abstain to let it pass, putting its passage in doubt.
“Stability is important,” European Monetary Affairs Commissioner Olli Rehn told reporters after meeting Irish members of the European Parliament in Strasbourg, France.
“We don’t have a position on the domestic democratic politics of Ireland but it is essential that the budget will be adopted in time and we will be able to conclude the negotiations on the EU-IMF program in time.”
On Tuesday, one of the country’s smaller political parties, leftist Sinn Fein, submitted a motion of no confidence in Cowen, although it is unlikely to be debated or put to a vote because the party lacks the required 12 signatories.
Trade unions have warned that the austerity plan could provoke civil unrest: a student demonstration over planned fee increases turned violent this month, and unions have organized a march to protest at the planned measures on Saturday in Dublin. Tens of thousands are expected to turn up.
Greece, the first country to be bailed out by the euro zone and the International Monetary Fund earlier this year and which endured months of social unrest, won a vote of confidence from EU and IMF inspectors on Tuesday after promising extra measures to shore up its ailing finances.
German Chancellor Angela Merkel said on Tuesday that Ireland’s crisis was different to Greece’s but just as worrying.
Cowen has defied calls to quit, saying the national interest required that he press on to unveil a promised four-year austerity package on Wednesday.
“We don’t have the luxury of time in relation to this,” Transport Minister Noel Dempsey told public radio on Tuesday.
A delay in adopting the budget would almost certainly prevent the release of the first bailout loans under IMF rules. A European Commission spokesman reminded Ireland that every day that passes was having an impact on its economy.
He also said it was hard to imagine Ireland remaining a low tax country in an apparent reference to Dublin’s ultra-low 12.5 percent corporation tax rate, an irritant to EU partners.
One Irish lawmaker who met Rehn, independent Marian Harkin, told Reuters: “He did not phrase it in the terms ‘No budget, no bailout’ but he said from the point of view of stability for Ireland and indeed for Europe (it is important) that there is some certainty.”
Anger at Cowen’s handling of Ireland’s economic and banking crisis has ballooned since he announced the bailout, and his chances of passing the budget fell dramatically when two independent lawmakers said they were likely to withhold support.
Sinn Fein activists scuffled with police outside parliament on Monday in a possible foretaste of social unrest over harsh wage and spending cuts to be announced this week.
However, some voters questioned in Dublin said they had more faith in the IMF than in their own politicians. “At least the IMF might know what they’re doing,” said Margaret, 49, an office worker, who declined to give her family name.
“I would love to have thrown my book at the TV as Cowen was talking last night, but I couldn’t afford a new TV,” she added.
The Irish government is expected to announce it will cut the minimum wage, social welfare spending and the number of public employees and add a new property tax and higher income taxes in a package intended to shave 6 billion euros off next year’s budget, and 15 billion off the annual budget by 2014.
The IMF said in a paper released on Monday that Ireland should gradually lower unemployment benefits and cut its minimum wage to boost employment.
European partners and the IMF agreed in principle on Sunday to rescue Ireland with an expected 80 to 90 billion euros in loans to try to stop its crisis continuing to undermine the value of Ireland’s traded debt and that of countries with similar problems — notably Portugal and Spain.
European financial markets slid on Tuesday, partly because of the mounting political uncertainty in Ireland and fears of contagion to other weak euro zone countries.
Irish shares were down as much as 3 percent, the cost of insuring Irish and Portuguese debt against default rose and the risk premium investors charge to hold Irish government bonds crept up further.
Ireland’s central bank governor, Patrick Honohan, said all the countries’ banks were up for sale, adding he expected the EU and the IMF to attach many conditions to a financial rescue.
“They are for sale as far as I am concerned,” Honohan told a meeting of accountants.
Both the main opposition parties, Fine Gael and Labour, who are likely to come to power in a coalition after next year’s election, had demanded that an election take place before the budget but have not said their last word.
Cowen called Fine Gael leader Enda Kenny and Labour leader Eamon Gilmore late on Monday night to offer to make the financial advice underpinning the budget available to them.
