Brendan Howlin warns ‘hung’ Dáil may spark second financial crash

There is a real prospect of a ‘hung’ Dáil and a period of political instability which could give rise to a second economic crash, Public Expenditure Minister Brendan Howlin has warned.
Brendan Howlin warns ‘hung’ Dáil may spark second financial crash

As the outgoing coalition saw a further slump in the polls, the Labour minister stressed that a political vacuum and the need for a second election could cost the State hundreds of millions of euro and therefore reduce funds available for public services.

In an interview with the Irish Examiner, he said the country could be left with no stable government — as has happened in Spain and Portugal — and it would be “more painful” to reconstruct our economy a second time.

As the election campaign passes its mid point, the warnings from the minister will be seen as an attempt to fire up Labour, who now risk seeing huge Dáil seat losses, according to opinion polls.

A weekend Red C poll gave them 8%, with no increase in the campaign so far. Fine Gael’s fall to 28% means the coalition’s joint support is well short of the numbers needed for a second term.

Mr Howlin said that, unlike other elections, there was no swing among voters since the campaign had begun. The campaign’s final week would be a decisive point, he said.

“Bluntly, the concern I have is that the current snapshot [of voters], which is simply a status quo position, if that was to replicate itself on polling day, there is no clear government.

“We could have a dolly-mixture government or worse still no government at all.”

The Wexford TD suggested there were “very dark clouds” across Europe now, relating to Britain’s uncertain future in the union as well as the high interest rates for borrowing faced by other countries that had, like Ireland, exited financial rescue programmes.

“At the end of the day, if we don’t have a clear government after polling day, we put our recovery, all the hard work of the last five years, at risk.

“If we go into reverse engines, as is happening to some extent in Spain because they’ve no clear result, or in Portugal or is clearly happening with Syriza in Greece, it will be much harder to reconstruct our economy for a second time.

“If we bruise investors, if we push up our interest rates on our payments again, it will be all the more painful and difficult to put it right a second time.”

“The prospect of a hung Dáil is real. I think that will shock people into thinking ‘what do I want’.”

Mr Howlin said the possibility of no government being formed after the election could then result in a second election after six weeks.

“Meanwhile, our borrowings go through the roof, we have to pay more of our hard earned taxes on paying interest. There’s no decisive decision making and nobody invests in our economy for a protracted period of time. Is that the outcome we want?”

Mr Howlin said a period of a political vacuum would see Ireland’s borrowing costs rise immediately.

“The cost of our borrowing is now amongst the lowest in the world, it’s less than 1%. That will inevitably increase if there is a period of instability.

“Just look at Portugal, now 3.6%, because there is an unstable period. Spain is at 2.5%, more than double our rate now.

“We would have to pay more in debt repayment, the longer the instability went on. If then we had to go to a second general election, we could have very significant difficulties economically.

“If the cost of paying back our debt goes up, every hundred million that we have to pay in additional interest charges is a hundred million we don’t have available to invest in health or education.”

A rise of just 1% on Ireland’s borrowing rate, could cost up to €750m a year.

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