Ireland's new Prime Minister in waiting has vowed to fight for a renegotiation of Ireland’s €85bn (£72.5bn) bailout package.
Enda Kenny, whose Fine Gael party trounced the deeply unpopular incumbent Fianna Fail, said the terms of the country’s debt repayment must be overhauled to prevent a mass backlash against its tough austerity measures.
Renegotiating the 5.8 per cent rate of interest on the €45bn European portion of the debt is seen as a priority. It is thought Ireland will push for a rate closer to the 3.2 per cent being paid by Iceland on the money it is repaying the UK and Netherlands, although a reduction of this size is unlikely.
Kenny said: “This particular IMF/EU deal is a bad deal for Ireland and a bad deal for Europe. It should not be set in stone. I see room for manoeuvre in terms of interest rates and in terms of the cost of the banking structure.”
Kenny said he will not raise income tax, will cut the rate of employers’ payroll tax and maintain the 12.5 per cent rate of corporation tax. Some European finance ministers had pushed for this to be hiked as punishment for Ireland accepting the bailout.
Kenny is already on a collision course with Brussels, saying in the run-up to the election that he will push for haircuts on holders of senior debt in Irish banks – an option opposed by both the European Central Bank and European Commission.
Fine Gael maintains it is committed to rapidly reducing Ireland’s budget deficit, which it says will be largely achieved through spending cuts.
It will also oppose transferring the land and development loans of Irish banks of less than €20m to the National Asset Management Agency (NAMA), which was an element of the bailout conditions.
However, its centre-right policies could be diluted should it enter into a likely coalition with Ireland’s Labour party. It is understood Fine Gael is exploring the possibility of forming a coalition with a number of independents. However the resurgent Labour party, which is expected to almost double its number of seats from 20 to 38, remains its likely partner.
Fianna Fail’s collapse will see it fall from 78 seats in 2007 to just 20, while Fine Gael will win around 75 seats, up from 51. Kenny called the victory a “democratic revolution,” saying “people didn’t take to the streets, they took to the ballot boxes”.
Sinn Fein tripled its presence in the Irish parliament, winning approximately 15 seats. Fianna Fail’s coalition partner the Greens were completely wiped out, with 1.8 per cent of the vote.