Irish PM Kenny pleads for time

Bloomberg

Ireland’s Prime Minister Enda Kenny pleaded for time and space to examine options to create a stable government, as the nation’s two biggest parties opened the door for an unprecedented grand coalition.
Kenny’s Fine Gael secured 25 percent in Friday’s election, according to a poll for broadcaster RTE. Traditional rival Fianna Fail secured 21 percent. Under Ireland’s electoral system, about 44 percent is needed for an overall majority.
“Democracy can be very exciting, but it can be merciless when it kicks in,” Kenny said in an interview with RTE late Saturday, conceding voters had rejected his preferred option of an alliance with the Labour Party. He said the “over-riding imperative” is to find a government to continue Ireland’s economic revival.
Like governments in Greece, Portugal and Spain, Kenny suffered massive losses in Friday’s election, feeling the force of popular wrath over spending cuts and tax increases. Kenny’s only option to provide political stability in the fastest-growing economy in the euro region is a pact with Fianna Fail, with bookmaker Paddy Power placing an 80 percent probability on such a government. Kenny said he’d take 48 hours to examine the outcome, adding the nation needed stability.
“There will be huge pressure on Fine Gael and Fianna Fail to come together or, if they don’t, to go to the polls immediately,” said Ryan McGrath, head of fixed-income strategy at Cantor Fitzgerald LP in Dublin.
Civil War
At 12:30 p.m. in Dublin on Sunday, 100 of the 158 seats were filled. Fianna Fail had 30 seats, Fine Gael had 28, with Sinn Fein taking 14 and the Labour Party four.
Fine Gael and Fianna Fail will seek to form a government, the Irish Times reported on Saturday, citing unnamed sources in both parties. Detailed talks would start after the next scheduled meeting of parliament on March 10 fails to elect a new government, the Dublin-paper newspaper said.
Before the election, both sides ruled out a pact, and Health Minister Leo Varadkar said on Saturday that the initiative may lie with the opposition to try to form a government.
Fine Gael and Fianna Fail trace their roots back to the nation’s bitter Civil War, a battle over the treaty which partitioned Ireland in the 1920s. Fianna Fail emerged from groups which opposed the 1921 peace treaty with the U.K. and Fine Gael has its roots in organizations which supported the agreement.
Yet, few ideological differences exist between the two sides and a coalition between them could avoid the instability roiling Portugal and Spain. Though Fine Gael pushed for higher tax cuts during the campaign, both parties respect European rules limiting the deficit and vow to protect the nation’s 12.5 percent corporate tax rate.
“There is hardly the width of a cigarette paper between them on most policy issues, “ said Philip O’Sullivan, an economist at Investec Plc in Dublin.