Deal done but huge hurdles now confront new partners
ENDA Kenny and Eamon Gilmore last night locked their coalition parties into a five-year plan of cutbacks and stealth-tax increases.
Fine Gael and Labour signed off on a coalition deal that largely sticks to the four-year plan agreed by the outgoing Fianna Fail-led administration with the EU and IMF.
The coalition won't reverse this year's harsh Budget measures and will have to identify €3bn in cuts and taxes for next year, despite promising not to increase income taxes.
But the new Government will face a number of major challenges. Key among those are:
- Renegotiating the interest rate on the EU bailout.
- Pushing through real public sector reform.
- Privatising key state assets.
- Finding €50bn to replace the ECB's emergency funding for the banks.
- Reducing the deficit without increasing income tax.
The two party leaders will hammer out the ministerial portfolios, with several departments being changed, and pick the new Cabinet over the next two days.
The new Coalition Government is expected to be appointed on Wednesday.
Fine Gael will get the traditional Finance Minister's job, in charge of fiscal planning and banking. There will be a second department -- for public sector reform and the Estimates -- taken by Labour.
Fine Gael will have 10 Cabinet positions. Labour will take five portfolios and the 'Super Junior' minister's position.
Fine Gael has also secured the roles of Enterprise Minister, Government Chief Whip and Ceann Comhairle. Labour gets to appoint the Attorney General.
A specific minister is expected to be put in charge of Fine Gael's 'New Era' plan for state investment in water, broadband, energy and communications services.
The new Programme for Government also includes plans for an economic council within the Cabinet.
Both parties were pleased with the programme. Mr Kenny emphasised that the Government would be getting straight down to business.
Mr Gilmore expressed a positive attitude about the cohesion of the new Government.
Neither the IMF, EU, nor the European Central Bank would comment last night on the deal, which will require some adjustment of the bailout terms.
The new Programme for Government is promising to cut payments for doctors, consultants and judges as part of its plan to achieve around €2bn in cutbacks in public spending next year.
But there is little detail in the document about where most of the €2bn will be found.
The wide range of compromises in the coalition document, includes a deficit reduction target of 2015, midway between Fine Gael and Labour's proposals.
Cuts in the public service will eventually reach 25,000 -- a compromise on Fine Gael's demand for 30,000 redundancies and Labour's 18,000.
The new Government will have to convince Europe and the IMF to reverse key conditions of Ireland's bailout deal if it wants to press ahead with all the elements of the banking package announced yesterday.