The Irish headed for the polls in parliamentary elections on Friday amid the worst economic recession in decades. The centrist Fine Gael, the largest opposition party, was expected to win if not an outright majority then certainly a plurality of seats in the lower chamber of parliament.
The country’s ruling and liberal Fianna Fáil party was preparing to be crippled with some polls suggesting it could lose as many as fifty seats, ending the dominant position it has commanded since the republic was proclaimed more than sixty years ago.
Voters were in a vicious mood over the bursting of a property bubble that left them steeped in debt and facing years of austerity to repay the European Union and the International Monetary Fund for a €85 billion bailout.
Despite the return of mass emigration and high unemployment, Ireland has not experienced the kind of mass demonstrations witnessed in fellow eurozone member Greece. While parties on the far left as well as the nationalist Sinn Féin have seen a surge in support on promises to rip up the bailout deal, they were likely to remain in the minority.
If Fine Gael makes a government alone, it will probably be with the help of four or five independent parliamentarians. Analysts expect it to form a coalition with Labor instead as it has in the past. The biggest hurdle to such a coalition is the country’s record 12 percent budget deficit. Labor wants an extra year, until 2016, to get it under 3 percent of GDP as required by European treaty.
Even as the Irish are struggling, their economic fundamentals are sound and their demographic outlook favorable enough for their country to return to a path of prosperity.
Ireland is one of the economically freest countries in the world with low corporate tax rates and very little impediments to foreign trade and investment. Some restructuring of its debt obligations is likely. Finn Gael leader Enda Kenny has pledged to renegotiate the penal interest rate that the government is paying for its bailout.
Over the long run, the next government has to root out the cronyism that gave property developers too much political influence, particularly on the local level. Kenny’s main responsibility as prime minister is to sustain the policies that fostered Ireland’s strong growth in the first place though. The left likes to blame the banks but if Ireland is to avoid depression, it can’t afford to