Eamon Gilmore and Enda Kenny outside Ireland's Government buidings

Ireland this week begins a new era of politics with a coalition of Fine Gael and the Labor Party set to tackle the worst recession in the state’s history. This follows an economic decline that plunged the outgoing administration leaders Fianna Fail into its worst general electoral performance, relegating it to a total of 20 representatives in the Dail (Parliament).

Fine Gael leader Enda Kenny and Labor’s Eamon Gilmore, with 113 seats between them out of a Dail total of 166, took just six days to agree a program for government.

They will announce their Cabinet ministers when the Dail resumes on Wednesday, March 9.

A key element of the deal will be, because of the giant amount of work to do resolving the banking crisis and helping Ireland build a recovery, starting their program with not one but two senior finance ministers.

Of the two Finance Department ministers, Fine Gael will get responsibility for the budget, taxation and banking, with Michael Noonan almost certain to be the minister. Labor will have responsibility for public expenditure and public sector reform, with Joan Burton the most likely minister but Pat Rabbitte also a possibility.

Fine Gael is also expected to get the vital folios of enterprise and employment, and health. Labor will be put in charge of foreign affairs, social protection and education. 

Gilmore is a hot tip for foreign affairs, a post probably even more vital than it was in recent decades given new Taoiseach (Prime Minister) Kenny’s declaration on Monday morning that that Ireland’s international financial bailout has not been working.

Already, after discussions with Finance Department officials, the new government taking up position this week has warned that the problems facing the country could be even more stringent than initially believed.

Burton has said the new government would await the results of bank solvency stress tests at the end of the month to find out what further difficulties may lie in the banking sector before renegotiating the terms of the EU-International Monetary Fund (IMF) deal.

But there will be an attempt to persuade the European Union and the IMF to renegotiate the interest on the massive bailout for Ireland.

“What we want is a renegotiation of the framework and contents of the IMF deal so the country can actually live, and grow and return to prosperity,” said Burton.

She said the government plans to use the 4.9 billion from the National Pension Reserve Fund in a “cautious and intelligent” way to stimulate investment in infrastructure.

A 64-page document, “Towards Recovery: Program for a National Government,” was approved unanimously by the Fine Gael parliamentary party and endorsed by a Labor Party delegate conference in Dublin.
Kenny and Gilmore met after the two meetings, and both stressed the urgency of dealing with the enormous problems facing the country.  Kenny said they had been given a strong mandate by the voters and intended to lead by example and tell people the truth.

He added, “It is not a Fine Gael document. It is not a Labor document. This is a program for government document that we have agreed on its contents.”

Earlier, Gilmore told delegates at the Labor conference that the program for government was a clear departure from the policies being pursued by the outgoing government. He said there would be difficult days ahead and the stakes were high, but he would not ask delegates to support the party entering government if he did not believe it could succeed.

Among the key elements of the program for government is an acceptance of the target of reducing the budget deficit to 3% of gross domestic product by 2015.

This is one year more than Fine Gael proposed in its election manifesto and a year less than the target advocated by Labor.

The program rules out any increases in tax on income, but a property tax in the form of a site valuation tax will be considered.

The program pledges the controversial universal social charge will be reviewed and the reduction in the minimum wage will be reversed.

Both parties said they are renewed to the commitment of the abolition of the Senate, but no time frame is specified.

There is a commitment to the establishment of a jobs fund, but up to 25,000 public sector jobs will go.
Although the government was not yet in place early this week, there was already a cautious welcome for its plans in Europe.

 But at home opposition parties, now led by Fianna Fail and Sinn Fein which nearly trebled its Dail numbers, said the new program was a “continuation of the previous government’s four-year economic plan.”  This charge was rejected by Fine Gael and Labor.

Sinn Fein President and newly elected Dail member Gerry Adams said the program would be bad for low and middle income families, and an austerity approach would mean further depressing the economy.

Joe Higgins of the United Left Alliance described the plan as reactionary, saying that it included attacks on living standards with new water and home taxes.

Outgoing Taoiseach Brian Cowen said he may take a break and a holiday with his family. His last public duty was to open a bog visitor center in his own constituency.