IRELAND’S new government will stick to the budget targets laid down in an €85bn (£73bn pound) EU/IMF rescue package as it seeks to win European partners round to giving it easier terms on the loans.
Ireland’s prime minister in-waiting Enda Kenny is under huge pressure to persuade Europe’s paymaster Germany to cut the interest rate Brussels is charging and give Dublin more time to restructure its banks before a Europe-wide deal on the debt crisis is hammered out at summit on 24-25 March.
The coalition agreement between Kenny's centre-right Fine Gael party and the centre-left Labour party, clinched shortly after midnight, seems designed to curry favour with the fiscally conservative Germans and draws a veil over some of the anti-EU rhetoric deployed in the election campaign.
“It is in everybody’s interest, not only the national interest of Ireland, but in Europe’s interest and in the interests of the maintenance of the euro that we have a path that is sustainable out of the economic hole that we find ourselves now in,” said Brendan Howlin, one of the chief negotiators for the Labour party.
Fine Gael, which will lead the new government, has persuaded Labour to drop its demand that Ireland be given an extra year to get its budget deficit under control and is aiming for the bulk of the adjustment to be achieved through spending cuts.
The new government will aim to shrink the shortfall from nearly 12 per cent of Gross Domestic Product (GDP) currently to below an EU limit of three per cent by 2015.
There will also be a new cabinet position to deal with public spending and public sector reform.
City A.M. Reporter