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Ireland's financial rescue triggers early elections

Irish Prime Minister Brian Cowen has announced early elections, as he faces discord from allies and enemies over his handling of the economy. On Sunday, Ireland requested financial aid from the EU and IMF.

Irish Prime Minister Brian Cowen

Cowen has come under pressure from all sides

Ireland's Prime Minister Brian Cowen pulled the country out of the frying pan of debt on Sunday, only to find himself plunged into the fire of a snap election on Monday.

After securing a financial rescue believed to be worth up to 90 billion euros ($123 billion) in loans from the European Union and the International Monetary Fund, the Fianna Fail party leader was forced to promise early elections as his political friends and enemies both turned on him.

"It is my intention at the conclusion of the budgetary process, with the enactment of the necessary legislation in the new year, to then seek the dissolution of parliament," Prime Minister Brian Cowen told reporters in a hastily-called press conference.

Cowen was effectively yielding to his government's junior coalition partners, the Greens, who called for elections in January, although he didn't promise that they would be held in that month. The two main opposition parties, Labour and Fine Gael, had demanded an immediate dissolution of parliament instead.

"What is needed now is an immediate general election so that a new government, with a clear parliamentary majority, can prepare the four-year economic plan, complete negotiations with the EU and IMF and frame a budget for 2011," Fine Gael leader Enda Kenny wrote in an e-mailed statement.

First things first

An Irish euro coin

Ireland requested help with its runaway debts on Sunday

Cowen's government is set to publish a four-year economic plan on Wednesday and a new, cost-cutting budget on December 7 - a process that is crucial to secure loan payments from the EU and IMF. Cowen said these processes would have to be completed before the dissolution of parliament, so as to protect Ireland from financial collapse.

The junior coalition partners, the Greens, pledged to support the government only until January; party leader John Gormley called on Cowen to name a date for elections in the new year, saying the Irish people needed "political certainty" and had been "misled and betrayed" by the prime minister's cabinet.

For about a week, Ireland had insisted that it could recover its economy without outside help, but caved in on Sunday and requested a bailout from the EU and IMF, following in the footsteps of Greece earlier this year.

The country faces a budget deficit of 32 percent of Gross Domestic Product, a figure which has ballooned because of the government bailout of its largest moneylender, Anglo-Irish Bank. Even without this extra expense, the country's 2010 shortfall would have comfortably exceeded the EU's prescribed limit of 3 percent of GDP.

Tough sell for European leaders

Angela Merkel

Merkel may struggle to convince her party and her people that Germany should foot part of the Irish bill

German Chancellor Angela Merkel said on Monday that the Irish rescue was "positive overall," because under the terms of the new deal, Dublin would be forced to obey terms set by the EU and IMF.

Merkel said the rescue package was necessary to stabilize the European single currency, the euro.

A similar loan package for Greece earlier this year, the first of its kind, was particularly unpopular in Germany, not least among Merkel's conservative Christian Democratic Union.

Britain's cash-strapped government, which is implementing its own series of tough austerity measures, also came under fire for contributing to the Irish rescue, but the government defended the action.

"Ireland is a friend in need, and we are here to help," the Conservative Chancellor of the Exchequer, George Osborne said.

Also on Monday, the credit ratings agency Moody's said it would probably downgrade Ireland's sovereign debt by several notches in light of the EU-IMF rescue.

Author: Mark Hallam (AFP, dpa, Reuters)
Editor: Michael Lawton

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