| 1.1°C Dublin

Stability depends on FG's choice

'To a rational person, tackling our crisis is obvious. . . However, politicians are not just irrational but often stupid'"If you can meet with triumph and disaster and treat those two impostors just the same...."

WITH Kipling's If in mind, Enda should avoid triumphalism next Sunday. One in three young people are out of work. And election results are not a call to celebration, but action.

Starting with a referendum on the bank bailout and a tearing up of the Croke Park deal, Fine Gael must announce on Monday week that our young will not be sacrificed, either on the altar of the banks or exorbitant state salaries. Had it done so during this campaign, it would be sure of a majority. Still it has -- as I've predicted for 25 years -- finally been rewarded for showing confidence in itself and throwing away the crutch of its coalition mentality. For several reasons, though (faint-heartedness on Croke Park, oddball policies on the Irish language), it may fall short of a majority. If so, then with whom should it govern?

To answer that we turn, not to economics, but political economy. Economics is rational and looks at tools (economic policies). Political economy looks at the people who use those tools: politicians. Tools are rational. Politicians are often the opposite of rational.

To a rational person, tackling our crisis is obvious: sell off semi-states (raking in billions and lowering the cost of living); benchmark non-frontline state salaries down to an EU average (saving billions); slash quangos and local authorities; and replace our universal welfare benefits with more targeted needs-based ones (saving billions more).

However, politicians are not just irrational, but often stupid. Despite 80 per cent of voters opposing it, they support the Croke Park deal designed to protect vested interests from the measures just described. Without that deal, the burden of the four-year recovery plan would be borne by vested interests. With it, ordinary people will suffer most.

If FG can't manage an overall majority, it might govern with independents. Like the Tea Party faction in the US, independents are refreshing and reinvigorating our democracy. But are they ready for government? Given that you have cannabis legalisers on one side and enemies of capitalism on the other, are they team players?

Between June 1981 and November 1982, three elections wrought havoc on Ireland -- two of them caused by temperamental independents bringing down the Government. Nor will support from Michael Healy-Rae send the right message to the country.

What about Labour? One can't blame Eamon Gilmore and Ruairi Quinn for wanting to get into a government immediately. Fourteen years in the wilderness is no joke for any politician and when he said a bad day in government was better than a good day in opposition, John Gormley was right. But is it in the national interest?

In the Nineties, FG and Labour governed well. But between 1982 and 1987 they were a disaster: from 90 per cent of GDP in 1982 they pushed our national debt up to 120 per cent by 1997 (in fairness, they did cut the deficit modestly). The average GNP growth rate in the period was a joke, just 0.3 per cent. Unemployment also rose dramatically between 1982 and 1987, from 11 per cent to 17 per cent.

The 1994-97 government was more successful, partly thanks to heavy lifting by FF's Ray MacSharry, FG's Alan Dukes and Des O'Malley of the PDs in previous years. By 1997 the economy was growing by 10 per cent, the deficit was down to 0.5 per cent and inflation was (despite rapid growth) low at 1.5 per cent.

In good times, FG and Labour can work. These are, sadly, not good times and the conditions facing a Fine Gael/Labour government in coming years will be far more like those of the Eighties than those facing them in the Nineties. And unlike the Eighties, Labour will have to look over its shoulder at Sinn Fein and the United Left Alliance. In terms of stability, the prospect of more than 100 TDs jostling for power in a government with the largest majority -- and the largest ideological divide -- in Irish history, does not bode well.

As argued here in January, a referendum is needed on the bank bailout. As Olli Rehn hinted last week, EU opposition to renegotiation is based on fears of contagion. With six more months of growth in the eurozone economy, those fears could abate by September and this would be a good month to hold a referendum.

If by then we can show not just a big stick (a referendum result will strengthen the Government's hand to renegotiate) but also real progress in breaking the back of our fiscal crisis, we may get better terms.

But do we seriously expect Angela Merkel or Nicolas Sarkozy to give us better terms when our senior civil servants earn more than their government ministers?

To make the fiscal progress necessary to convince Europe to renegotiate, we must ditch Croke Park. This is something no self-respecting Labour party can do, or should do. Micheal Martin has said he will support a Fine Gael government on condition it sticks to the four-year recovery plan.

The precedent of Alan Dukes shows how Fianna Fail will have to act in the national interest. That means accepting that Croke Park must be scrapped and that the 2014 deadline must be extended by a year. Fine Gael must, in turn, swallow its pride about accepting support from Fianna Fail; the young people of this country neither care nor understand the tribal neurosis that drives both parties' contempt for each other and, like old King Solomon, will reward the party that they see is acting in the national interest rather than the self-interest.

The only condition Micheal Martin should attach is that the deal will extend only until June 2013. By then we will have made enough progress for our Government and banks to be able to go back to the bond markets on reasonable terms. And by then the Labour Party -- which had neither hand, act nor part in this crisis -- will deserve to put its case to the people. A left-of-centre government may by then be just what the doctor ordered.

Marc Coleman presents 'Coleman at Large' on Newstalk 106-108fm

Sunday Independent