Ireland News:

Bailout of Ireland Sparks Wave of Anger as Budget Vote Looms

By GUY CHAZAN And NEIL SHAH

   NOVEMBER 24, 2010

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Associated Press

Employees of Ireland's minister for transport cleaned up on Tuesday after vandals sprayed the word 'traitor' on the office in Trim.

DUBLIN—The people of Ireland struggled to come to terms with an international bailout that many see as a humiliating loss of sovereignty, while pressure piled up on the government ahead of a crucial vote on next year's budget.

As Ireland's political turmoil intensified Tuesday, much of the anger among its citizens was aimed not at the European Union and the International Monetary Fund—which pressured the country to take the aid—but at the Irish government that created the mess necessitating it.

"If they force us to clean up our act, they're welcome," said Josephine Luibhéid, a retiree here. "The government is incompetent. It believed everything the banks told them and then wrote them a blank check."

At the same time, Ireland's efforts to cut its budget are also causing pain among voters.

Anger at the government escalated as opposition parties continued to call for immediate elections, a day after Prime Minister Brian Cowen's governing coalition began to unravel.

The international bailout, widely seen as a huge blow to national pride, has prompted a round of soul-searching. Ireland treasures the independence it won from Britain 88 years ago after a long and bitter struggle, and there are real fears the country may now lose some control over its affairs. Speculation Ireland may have to give up its low 12.5% corporate tax rate—a beacon for international firms— hasn't disappeared, though the government has said it stands behind the tax rate.

"The true ignominy of our current situation is not that our sovereignty has been taken away from us, it is that we ourselves have squandered it," a recent editorial in the Irish Times said. "It is the incompetence of the governments we ourselves elected that has so deeply compromised our capacity to make our own decisions."

Mary Comer, a civil servant, said the bailout "makes us look like we're begging." But international scrutiny of Ireland's finances might not be a bad thing, she added. "It'll be good to know someone's watching over us."

She reserved most of her scorn for the government. "I just don't believe them. All these politicians are only in it for the money," She said since the recession started, her salary has been cut three times, and she expects there will be more cuts.

The Sinn Féin party, which holds just four seats in Ireland's 166-seat parliament, on Tuesday called for a no-confidence vote in Mr. Cowen, though it is unlikely to win the support needed from other opposition parties to push it through. Frustration also mounted among members of Mr. Cowen's Fianna Fail party, with chatter growing that he should resign despite lacking an obvious successor.

Mr. Cowen has resisted these calls and instead urged lawmakers to pass his 2011 budget, which Irish and European officials say is a key precondition of the estimated €80 billion ($109 billion) bailout Ireland is negotiating with the IMF and the EU.

But he was forced to promise an early election next year after his junior coalition partner, the Green Party, said Monday it will quit the government. On Wednesday, Mr. Cowen's government is to unveil a controversial four-year budget plan expected to cut another €15 billion from public finances that have already been tightened. That comes ahead of a Dec. 7 vote on a specific budget for 2011.

One of the key arguments being marshaled by Mr. Cowen's opponents: By being forced to accept international aid, the government has lost all legitimacy.

"We've had a loss of sovereignty here for the first time since the foundation of the state," Enda Kenny, leader of the center-right Fine Gael, said in a television interview. The government had "handed over our economic independence to people from outside," he said.

The irony is that Mr. Cowen's party, Fianna Fail—or "Soldiers of Destiny"—has long been seen as the trusted guardian of Irish self-determination. Listed among its key principles is a commitment "to maintain the status of Ireland as a sovereign State."

The party was a product of Ireland's long struggle for independence from Britain, and its founders instigated a civil war because they considered the peace deal struck with Britain in 1921 a betrayal of Irish independence.

In power, Fianna Fail was credited with helping to transform Ireland into a "Celtic tiger," one of Europe's fastest-growing economies. In recent years the country boasted low national debt, strong inward investment and a reversal in the historic trend of mass emigration. But the party was also accused of being too cozy with the property developers and bankers many hold responsible for fueling Ireland's economic boom and subsequent burnout. The party's ratings have fallen to 17% in recent polls.

"It's a sorry state to be in when a very successful economy was effectively destroyed in a very short period," said Blair Horan, general secretary of the Civil Public and Services Union and a political independent. "It's a humiliation and an embarrassment." But he said he didn't feel Ireland was losing its independence by accepting the bailout. "Sovereignty in the euro zone is shared anyway," he said.

Others make a similar argument. "Sovereignty was transferred to Europe long ago, when we joined the European Monetary System and then the euro zone," said Anton Murphy, a professor of economics at Trinity College, Dublin. "That's when we gave up our independent monetary and exchange-rate policy."

In exchange, membership in the euro currency delivered huge gains for Ireland, he said.

, making it an attractive place for foreign investment and a bridge between the U.S. and Europe.

Protests in Ireland have been muted compared with those in Greece and Spain, or France, where President Nicolas Sarkozy's raising of the retirement age has pushed many angry citizens to the streets. While some Irish union officials are planning a protest on Saturday, many citizens feel they have no good political or economic options.

"There's huge anger, but no sense of what to do with the anger," says John FitzGerald, an economist at the Economic and Social Research Institute in Dublin.

Write to Guy Chazan at guy.chazan@wsj.com and Neil Shah at neil.shah@dowjones.com

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