The BBC reports that Enda Kenny’s Fine Gael party has reached agreement with Eamon
Gilmore’s Labour party. The new coalition is understood to be determined to renegotiate the precise terms of its EU/IMF bailout. If they succeed (which is far from certain) they will have
served two purposes: first, to obtain a better deal for the Irish taxpayer; and second, to give the government a nourishing political victory over ‘the Germans‘, now loathed by Ireland’s boisterous eurosceptic movement.
So, will it be an easy coalition? There is a tendency in Britain to define all politics in terms of left and right; already the BBC is busy with ‘centre-right Fine Gael’ and ‘centre-left Labour’. In fact, Irish politics does not strictly conform to this paradigm: it is largely determined by the historical context of Eamon De Valera, Michael Collins and the legacy of the Irish Civil War. Those ties persist, and many in Ireland vote as their fathers did. This explains why Fianna Fail has been in power for 64 of the last 81 years, and why, as Alex suggested a couple of days ago, Fine Gael couldn’t fully capitalise on Fianna Fail’s recent implosion.
More to the point, all Irish parties favour high state spending and intervention. Ireland’s public services are the envy other countries because they are staffed by the best graduates available, who are attracted by very generous pay packages. Recently qualified teachers in Ireland earn a basic salary of 30,904 euros (£26,478); their English and Welsh equivalents earn just £21,588. Similarly, a senior staff nurse in Ireland earns a basic salary of 45,472 euros (£39,372); an English equivalent is elusive, owing to the NHS’ complicated band pay structure and regional variation, but the relevant post falls in an enormous bracket between £25,472 and £40,157, and I’m told it doesn’t sit at the top-end of that spectrum.
Within this context, it should be noted that Fine Gael appears to be more neoliberal than the Labour party. During the election, Kenny campaigned for a 27:73 split between tax rises and spending cuts to tackle the deficit; Gilmore favoured a balanced 50:50 split. But spending cuts and the role of the state needn’t be a cause of constant division. Although Kenny hopes to make the state and the economy more efficient by cutting bureaucratic regulations on small businesses; he does not share the view of the right in this country that the state is an impediment that hampers growth. On the contrary, world class public services are essential to Ireland’s recovery. Kenny has indicated that 30,000 public sector jobs will go through ‘natural wastage’, but he’s said very little about Ireland’s arguably over-generous public sector pay settlement.
Another peculiarity of Irish politics is that its seemingly left-wing parties favour low taxes. Now all concede that tax will have to rise, but disagree to what extent. Kenny has room to accomodate Labour on tax. Brian Cowen’s recent emergency budget kept corporation tax at 12.5 percent, whilst the basic rate of income tax stands at 20 percent to 36,400 euros (£31,186.96) for individuals without independent children and 41 percent is paid on the difference thereafter. Those are scarcely punitive rates, especially given the circumstances and there are also innumerable exemptions for workers. Kenny could tweak those to answer some of his political and economic quandaries.
However, with nothing to offer in manufacturing and primary industry, Ireland has to be irresistibly attractive to blue-chip businesses, migrant workers and of course its own graduates. Means have to match ambitions, something Fianna Fail failed to achieve. Kenny now has to reduce a deficit without damaging a delicate tax system or already exceptional public services. Renegotiating the terms of the bailout would be the ideal start. But in that and everything else, he’ll need the luck of the Irish.
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