Cowen fury at BBC 'when not whether' bailout claim
Kenny to be outflanked by Fine Gael rebels who won't oppose the Budget
Published 14/11/2010 | 05:00
The Government has denied for the second time in 24 hours that it is in bailout talks with the EU, after the BBC reported yesterday that "preliminary talks" on financial support are taking place.
The BBC report made the unsubstantiated statement that recourse to the EU bailout fund was "no longer a matter of whether but when".
But a spokesman for the Department of Finance was adamant last night: "There are no talks on an application for emergency funding from the European Union."
He referred to an interview Finance Minister Brian Lenihan gave on Friday in which Mr Lenihan denied a report by Reuters that such talks were under way.
The Finance Department spokesman said yesterday: "Ireland is fully funded into the middle of 2011."
Earlier yesterday, a government spokesman also denied to the Sunday Independent that bailout talks were taking place: "No. We are not in preliminary talks about funding for the State," he said.
It is against this feverish background that three Fine Gael TDs yesterday told the Sunday Independent that they would "act in the national interest" to ensure the Budget is passed on December 7.
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The "rebel" TDs, who are opposed to the leadership of Enda Kenny, believe Mr Kenny is prepared to defeat the Budget and collapse the Government, thereby forcing an immediate general election.
The Fine Gael TDs have told the Sunday Independent that they are prepared to ensure the Budget is passed, as the EU Commissioner, Olli Rehn, asked of the Opposition in Dublin last week.
With the threat of financial collapse, and a humiliating EU bailout hanging over Ireland, government sources last night said they were "baffled" at international media reports that Ireland was in talks in relation to financial support from the EU. A Government source said: "The BBC report quotes Irish officials, but we have checked in Dublin, Brussels and London and nobody says they have talked, as quoted, to the BBC."
The news that some Fine Gael TDs are prepared not to oppose the Budget will come as a relief to Taoiseach Brian Cowen and his Government, which has a slim majority, but is a blow to Mr Kenny, who is anxious to succeed Mr Cowen as quickly as possible.
The revelation will also be welcomed, more generally, as something which could help calm international investor sentiment towards Ireland in the short term.
Confidence in Ireland virtually evaporated on the financial markets last week with the result that there was an almost wholesale sell-off of government debt, pushing up interest rates on State borrowings to an unsustainable 9 per cent at one stage.
The panic on the markets came in advance of speculation on Friday that intensive EU discussions were under way with a view to putting in place a rescue plan worth more than €80bn for Ireland as soon as this week.
Yesterday, the International Monetary Fund's managing director, Dominique Strauss-Kahn, said that Ireland could manage its fiscal affairs well, and that the IMF had had no request for aid.
But also yesterday a former chief economist at the IMF said Finance Minister Brian Lenihan must immediately ask the IMF for a bailout -- or risk bankrupting the State. Simon Johnson said: "For the sake of the Irish people, it's time to go to the IMF. If you go now and if you go with your partners, you will get a good deal. You may not get such a good deal next week." And last night BBC News was reporting that Ireland was, indeed, in "preliminary talks" with EU officials for financial support. BBC business correspondent Joe Lynam said any bailout would not be agreed this weekend, but might come as early as next month.
As of now, the passage of the Budget on December 7 is regarded as an important first step to calm the markets, help restore Ireland's reputation internationally, and for the country to retain some level of economic sovereignty.
Domestically, the political focus will this week move to the Donegal South West by-election on November 25, the outcome of which will have a bearing on the Budget's prospects.
Fianna Fail sources yesterday said the party was "cautiously more optimistic" that its candidate might actually win the by-election, although the smart money remains on the Sinn Fein candidate.
The outcome of the by-election is expected to come down to the transfers of the Fine Gael candidate. Were Fianna Fail to win, the prospect of the Budget passing would be strengthened. Within Fine Gael, however, there are widely opposing views as to how it should approach the Budget
Olli Rehn, the European Commissioner for Economic and Financial Affairs, who was in Dublin last week, has stressed to both Fine Gael and Labour that the Budget must be passed.
Despite outward shows, however, the Fine Gael leadership remains in no mood to offer support to the Government.
The Fine Gael position is being dictated by its Finance spokesman, Michael Noonan, and its leader, Enda Kenny, who sees this as his best chance of being elected Taoiseach.
Many political observers believe Fine Gael would be prepared to abstain to ensure the Budget is passed on a second vote, if the Budget fell by the withdrawal of support for the Government from either Independent TDs or by Fianna Fail or Green TDs voting against.
In such a scenario, the theory is that Fine Gael would abstain, in the national interest, on a commitment from the Government that a general election would take place early in the New Year.
But Fine Gael rebels are convinced that Mr Kenny is determined to vote against the Budget come what may.
A Sunday Independent/ Quantum Research poll this weekend found a huge majority (69 per cent) felt the Opposition should support the Government on the Budget while 31 per cent said it should not.
Today's revelation, however, that several Fine Gael TDs, who oppose the leadership of Mr Kenny say they are prepared to break ranks adds further to the political uncertainty at the moment.
Mr Kenny remains deeply unpopular among a large swathe of his parliamentary party, a position he has done little to change since an unsuccessful heave against him last summer.