Irish government braces for by-election setback and protest

Ireland’s government braced Friday for the result of a by-election which looked set to cut its slim parliamentary majority, while unions prepared to vent their anger in a mass weekend protest.

As EU heavyweights Germany and France urged a rapid conclusion to negotiations on a bailout for Ireland worth 85 billion euros (114 billion dollars), it appeared possible that an announcement will be made Sunday.

Defeat for Prime Minister Brian Cowen’s Fianna Fail party in the by-election in Donegal, northwest Ireland, would add to the pressure on his beleaguered coalition government.

All the indications were that the nationalist Sinn Fein had a clear lead, meaning the government would be left with just a two-seat margin, which is likely to increase calls for a snap general election.

The government was also preparing for tens of thousands of demonstrators to take to the streets of Dublin on Saturday in protest at a draconian set of measures to reduce the one-time Celtic Tiger’s massive deficit.

“People need to show there is an alternative. It is important they show how they feel about a plan that will increase unemployment,” Macdara Doyle, spokesman for the Irish Congress of Trade Unions, told AFP.

The austerity plan announced Wednesday will cut the minimum wage and slash 25,000 public sector jobs, as Ireland strives to bring its burgeoning deficit back under three percent of gross domestic product from its current level of 32 percent.

Jack O’Connor, president of SIPTU, Ireland’s biggest union, said fears that the demonstration could turn violent would not prevent its members from turning out.

“There’s an attempt at scaremongering to dissuade people from participating but I’m not worried about violence,” he said.

Meanwhile, Chancellor Angela Merkel and French President Nicolas Sarkozy united to push forward the negotiations on the Irish bailout.

The two leaders spoke Thursday and “agreed that negotiations with the Irish government must be rapidly concluded,” Merkel’s press office said.

Sources in Brussels told AFP that the bailout talks would wrap up Sunday, probably in order to make an announcement before markets opened on Monday.

The Irish Times reported that officials involved in the bailout were examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland’s debt-ridden banks.

Such a move would reduce the cost to the state by minimising the interest bill on the emergency loans, the paper said.

But the international intervention to help Ireland has failed to shore up the euro.

The growing fears of contagion spreading to Portugal and the far larger Spanish economy caused the euro to slip to a two-month low against the dollar at 1.3201 dollars, although it recovered slightly later Friday.

Prime Minister Jose Luis Rodriguez Zapatero insisted Friday that he could “absolutely” rule out an Irish-style bailout for Spain, whose economy is twice the size of Ireland, Greece and Portugal combined.

“I am not delivering a message of confidence just because I want to but because of concrete facts,” Zapatero said in a radio interview.

Ireland’s austerity plan and a budget on December 7 are crucial steps to show its fellow members of the 16-nation eurozone that it is putting its finances in order.

But Cowen has refused to hold a general election until lawmakers have passed the budget, which is unlikely to happen until January.