DUBLIN (Reuters) - Ireland’s Enda Kenny was elected prime minister with a record majority on Wednesday and pledged to lift the euro zone struggler out of its “darkest hour” as talks on a bailout loom.
The former primary school teacher is under pressure to persuade Europe to cut the cost of a rescue package investors fear could bankrupt the former “Celtic Tiger” economy and viewed with resentment by stretched Irish taxpayers.
“Yes we are in times without precedent but I believe that for Ireland this current crisis is the darkest hour before the dawn,” Kenny told the packed chamber, with his wife and family looking on from the gallery.
“It is the first day of a journey to a better future.”
Kenny’s centre-right Fine Gael and junior coalition partner the centre-left Labour party scored historic election victories last month on a wave of anger over the 85 billion euros EU/IMF bailout and the reckless bank lending which sparked it.
With a gaping budget shortfall and a need to get the fiscally conservative Germans on side, the new government has promised to stick to the austerity targets laid down as part of the bailout, prompting derision among left-wing lawmakers.
“The poisonous cocktail of austerity drawn up, concocted by the witchdoctors in Brussels and in Frankfurt because of the sickness of the European financial system is to continue to be force-fed to the Irish people,” Socialist Party member Joe Higgins told parliament.
Despite the vocal opposition, the government’s record mandate ensured Kenny was elected Taoiseach (prime minister) with 117 votes for and 27 against.
He named Michael Noonan finance minister, as expected, while Labour leader Eamon Gilmore, who took a strong anti-EU line during the election, will be deputy prime minister and take over the combined portfolios of foreign affairs and trade.
Labour’s Brendan Howlin, a former minister of health and of the environment, will take over a new role focussing on public sector reform and spending. He will have to oversee some 25,000 job cuts between now and 2015.
Irish voters hope the government’s large majority will aid Kenny’s efforts to renegotiate the bailout’s terms before a regional deal on resolving Europe’s sovereign debt crisis is hammered out at a summit on March 24-25.
Euro zone leaders meet on Friday to set the parameters of that package and agree a “competitiveness pact” Germany and France want implemented as part of any deal on the crisis.
Kenny will have a private meeting with the European Commission President Jose Manual Barroso in Brussels on Thursday night, an Irish government spokesman said.
Expectations are high that Europe will agree to a cut in the average 5.8 percent interest rate it is charging on over 40 billion euros (34.3 billion pounds) worth of loans but there are concerns that will be like sticking bandaid on a gaping wound.
A Reuters spreadsheet model of Ireland’s debt trajectory has shown that a cut in the interest rate would only have a marginal impact on Dublin’s debt mountain, which the IMF has said could hit 125 percent of Gross Domestic Product (GDP) by 2013, and suggests bolder steps would be needed.
But the European Central Bank (ECB) has shot down proposals to impose losses on some senior bondholders in Irish banks and German Chancellor Angela Merkel is under pressure from domestic voters not to give in to euro zone stragglers with extended loan repayments or bond buybacks.
The lack of progress on a deal has kept Irish borrowing costs close to record highs and analysts are sceptical that an eventual agreement will end doubts about Ireland and other debt-ridden nations such as Portugal, seen as next up for a bailout.
“Unfortunately, Europe tends to work by crisis and the most likely outcome is that markets look at the results say, ‘This won’t work’ and pressure returns,” said Austin Hughes, chief economist KBC Bank.
With years of cutbacks and tax increases part of the EU/IMF package, Irish people feel they are being unduly punished for the banking crisis and their anger triggered what Kenny has described as a “democratic revolution.”
The outgoing government was booted out of power with the once dominant Fianna Fail reduced to a rump of 20 seats and forced to share the opposition benches with Sinn Fein, the political wing of the now dormant Irish Republican Army, which won 14 seats, its best showing in living memory.
A record 17 independent lawmakers, many with a left-wing ethos, and two members of the Socialist Party, were elected.
Additional reporting by Luke Baker in Brussels; Editing by Janet Lawrence and Angus MacSwan