FG warning shot to Labour: 'No easing up on budget cuts'
Tensions to rise between parties as Labour tries to find new way in Coalition
FINE Gael is warning the next Labour leader that there will be no loosening of purse strings in the wake of the local and European elections drubbing.
The senior coalition partner insists the Government won't ease up on planned cuts in October's Budget to appease the electorate unless the funds are available.
The incoming Labour leader faces a monumental task to rebuild the party's support following huge losses in the local and European elections.
Leadership candidates are expected to try to win support by promising an easing of austerity measures and concessions for families hit hard by tough Budgets.
Minister for Public Expenditure and Reform Brendan Howlin and junior health minister Alex White are holding off on making their decision until after the first meeting of Labour TDs and senators since the election, which takes place this afternoon.
Alan Kelly, junior transport minister, is considering his options and says that he will run for either the leader or deputy leader positions.
But no matter who succeeds in the race for the post, Fine Gael will not allow the incoming leader to change the Government's overall economic policy in a bid to win back voters angered by years of austerity.
Finance Minister Michael Noonan said the level of adjustment in October's Budget would depend on economic growth – not "political pressures".
He said that it was too early to know whether he would implement the €2bn in cuts that had been agreed with our creditors.
"We'll have a better idea as the summer goes by of what the quantum of adjustment necessary is," he said.
"But these things are governed by the new fiscal rules in Europe – so there isn't that much domestic discretion, regardless of what the political pressures are to vary from the targets."
Fine Gael ministers are adamant the country has to stick to the agreed fiscal targets in order to continue the recovery of the economy.
However, there is still hope the next two Budgets can ease the burden on hard-pressed families and middle-income earners.
The new Labour leader is expected to come to Fine Gael with a "shopping list" of items they want implemented, but these will have to be done within existing parameters.
"No matter who the leader of the Labour Party is going to be, the Government is going to need to stick to the plan. We are not prepared to roll over on financial and economic issues," said one senior Fine Gael minister.
"After the sacrifices people have made, it would be stupid to throw that all away. We can still have two good Budgets that will help."
Ms Burton remains the favourite to become the next Labour leader and Tanaiste, but has clashed with Fine Gael in the past.
The Social Protection Minister has long been viewed as being a dissenting voice on budgetary policy, but without explaining where additional funds have come from.
However, she has successfully defended her own social welfare budget over the past three Budgets – and reduced the amount of cuts from her department each year.
"She'll have to demonstrate a little more political pragmatism if she is to keep the Government for two years. It will be interesting to see how she would respond," said one minister.
Arriving at a meeting of EU leaders in Brussels last night, Mr Kenny said his priority was to pursue the conclusions of the so-called "seismic shift" decision of June 2012, which acknowledged Ireland as a special case in severing the link between bank and sovereign debt.
"My insistency in here is that we continue on the conclusions for banking union, so that the decision of June 2012 in respect of breaking that vicious circle can be implemented," he said.
Mr Kenny says he brought up a bank debt deal for Ireland at the EU meeting. He said he pushed for a deal on grounds of a fair Europe and solidarity for Irish who suffered from austerity measures
Fine Gael ministers say the survival of the Government for its full five-year term will come down to October's Budget, especially if Ms Burton is the Labour leader.
"It depends on what approach she takes. The Budget will be the first real test – not the reshuffle or the Programme for Government," a minister said.