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Irish financial crisis threatens government

By the CNN Wire Staff
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Irish PM: First bailout, then elections
  • Prime Minister Brian Cowen: "It is imperative for this country that the budget is passed"
  • Cowen: We'll dissolve parliament after bailout, budget and fiscal plan are dealt with
  • Green Party called for new elections after Cabinet signed off on $11 billion bailout
  • Europe, IMF and Ireland continue to negotiate details of the bailout

Dublin, Ireland (CNN) -- Irish Prime Minister Brian Cowen on Monday said he will delay any decision on whether to go ahead with national elections until the 2011 budget is passed and negotiations on the details of an international bailout package are finalized.

"I'm saying that it is imperative for this country that the budget is passed," Cowen said at a news conference Monday evening in Dublin. "I'm also saying that it is highly important in the interests of political stability that that happens. It's very important for people to understand that any further delay in this matter in fact weakens this country's position."

Earlier Monday, the Green Party, one of several parties in Ireland's coalition government, called for new elections amid controversy after the Cabinet signed off on the bailout from the European Union and the International Monetary Fund -- a rescue package estimated to cost tens of billions of dollars. Green leader John Gormley wants the elections to be held at the end of January.

Cowen confirmed that he would seek the dissolution of the Dail, Ireland's parliament, when legislators have passed the 2011 budget and published a four-year fiscal plan and when the bailout loans are confirmed.

What does the bailout mean?

"This past week has been a traumatic one for the Irish electorate. People feel misled and betrayed," Gormley said in a statement. The party has said that its involvement in the government would go on "as long as it was for the benefit of the Irish people," but added, "We have now reached a point where the Irish people need political certainty to take them beyond the coming two months."

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"So we believe it is time to fix a date for a general election in the second half of January 2011," it said.

The international bailout comes with required spending cuts that Irish politicians are saying will be a shock for voters.

Cowen requested substantial "financial assistance" from the European Union and the International Monetary Fund on Sunday evening, and pledged spending cuts and tax increases.

The request came less than a week after the prime minister said Ireland had "made no application for external support" for its debt-ridden banks, which Dublin has spent billions trying to buttress.

In addition, the British government offered Ireland a 7-billion-pound ($11.3 billion) direct loan on Monday.

Read details about the offer

Labour Party leader Eamon Gilmore had called on the Greens to bring the government down if the senior party, Fianna Fail, didn't agree to new elections in January. He praised the Green announcement, saying the coalition partner "has at last recognized what the country has realized for many months -- that this government is long [past] its sell-by date and that it is incapable of leading the country to economic recovery."

Fine Gael leader Enda Kenny called for "an immediate general election so that a new government, with a clear parliamentary majority, can prepare the four-year economic plan" to spur Irish recovery.

Analyst: Investors want Euro clarity

Fears about Ireland have pushed down the value of the euro against the dollar and put stock markets under pressure.

Ireland is forecast to run a deficit of 11.9 percent of its GDP in 2010. And overall, the country is grappling with a running tab of debt that will total 98.5 percent of its entire economy this year, Cowen said.

Since 2008, Ireland has enacted strict budget-cutting measures, slashing about $20 billion off the country's budget. Now it's time for round two, as Cowen plans to cut an additional $20 billion over the next few years.