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Ireland Races to Pass Budget as Coalition Government Collapses

Irish political leaders said they’ll press to pass a budget before elections as the collapse of Prime Minister Brian Cowen’s coalition threw the government into disarray.

Finance Minister Brian Lenihan will meet today lawmakers from the Green Party, which withdraw from the coalition yesterday, and opposition parties in Dublin to discuss a timetable for passing the Finance Bill. The plan would enact 6 billion euros ($8.2 billion) of tax increases and spending cuts.

Enacting the budget is a condition of Ireland’s 85 billion aid package from the International Monetary Fund and the European Union. The Greens said yesterday an election may take place late next month. Cowen said the finance bill has to pass before national elections are held on March 11.

“It looks like the finance bill will pass,” said Kevin Rafter, a professor at Dublin City University who has published books about Irish politics including a history of Fine Gael, the biggest opposition party. “All the parties want it off the table before the election.”

Lenihan said it may be feasible to pass the bill on Feb. 2, telling national broadcaster RTE late yesterday, “I accept we have to accelerate the timetable for the general election.”

Opposition parties are pushing for faster passage.

James Reilly, deputy leader of Fine Gael said yesterday the bill can be passed this week. The Labour Party said it will table a confidence motion this week if the government doesn’t commit to passing the law by Jan. 28.

Off the Table

The extra yield investors demand to hold Irish 10-year bonds rather than German securities of similar maturity narrowed 3 basis points to 561 points on Jan. 21. That is still lower than a euro-era record of 680 points on Nov. 30, two days after Ireland accepted the bailout.

“More uncertainty is about to enter the stage with negative consequences for European sovereign debt and the euro,” said Mark Grant, managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, yesterday. “If the finance bill does not pass or is postponed until after the elections then there will be a significant amount of stress placed upon both sovereign and bank debt in Europe.”

The political turmoil was triggered when Cowen said on Jan. 22 he’ll stand down as leader of his Fianna Fail party.

Backing for Cowen’s party has dropped to 14 percent, according to a poll carried out this month. Since Cowen succeeded Bertie Ahern 2 1/2 years ago, unemployment has doubled, the financial system has come close to collapse and emigration resumed.

Banana Republic’

“It’s almost like a banana republic,” said Eugene Murray, 52, a nurse, speaking in front of prime minister’s office in central Dublin. “Brian Cowen probably should have resigned a lot earlier.”

Foreign Minister Micheal Martin, who lost a leadership challenge to Cowen last week, is favored to become new leader of the party, according to Dublin-based Paddy Power Plc. Lenihan is second favorite.

“A new leader may save a few seats, but the election will still be fought on the government’s handling of the economy,” Rafter said. “The Irish people are getting ready to hand them a thumping.”