by Frank Schnittger
Sun Nov 28th, 2010 at 12:00:04 PM EST
The Donegal South West bye-election resulted in a resounding win for Sinn Fein in a Fianna Fail (ruling party) stronghold. A nationwide opinion poll just out reinforces the message that the public is taking a very different view on the possibility of a debt default than the Government.
Default! Say the people - National News, Frontpage - Independent.ie
A SUBSTANTIAL majority of the Irish people wants the State to default on debts to bondholders in the country's stricken banks, according to a Sunday Independent/Quantum Research poll. The finding that 57 per cent favour and 43 per cent oppose default reflects a growing view among policymakers and opinion formers that the State simply cannot support the debt burden it has taken on.
The telephone poll of 500 people nationwide has also found that a majority of around two-thirds opposes the headline measures in the Government's four-year plan.
Following Fianna Fail's loss of the by-election in Donegal last week, the findings will add to political uncertainty as an austerity Budget approaches on December 7.
As Ireland awaited the fine details of the international bailout, which are expected tonight, it was learned last night that the Irish delegation negotiating with the EU-IMF last week raised the issue of default.
"The Europeans went completely mad," a senior government source said.
According to the Irish Independent the Irish electorate are taking a very sophisticated view of how the the default should be timed and implemented...or perhaps the writer (Jody Corcoran) has over-interpreted the findings..
Default! Say the people - National News, Frontpage - Independent.ie
But whatever interest rate is eventually agreed -- it is expected to be closer to 6 per cent -- the State will be burdened with a colossal annual interest payment of around €5bn over nine years, if or when the bailout is drawn down. This effective doubling of the interest payments that are already being made has helped to convince the public here that there must now be a default on a portion of the debt -- specifically, the portion lent to Irish banks, including senior bonds.
If that was to happen, it would be likely to cause a severe shock to the financial system worldwide and raise the risk of an international meltdown. However, advocates of a default say it is no longer in Ireland's national interest to prevent senior bondholders taking a hit.
The argument goes that a bailout from the EU-IMF will effectively neutralise the argument that default on bank bonds would cause investors to stop lending money to the Government.
If Ireland is forced to default, there is a view that it should happen after the financial system has been restabilised, reformed and restructured, so that it can absorb the losses without the risk of meltdown.
So what conclusions can we draw from the hard evidence presented by the Donegal South West bye-elections?
Donegal South West by-election, 2010 - Wikipedia, the free encyclopedia
Donegal South West by-election, 2010
[6]
Party Candidate % 1st Pref Count 1 Count 2 Count 3 Count 4
| Sinn Féin | Pearse Doherty[12] | 39.85 | 13,719 | 13,736 | 15,488 | 16,897 |
| Fine Gael | Barry O'Neill[1] | 18.66 | 6,424 | 6,442 | 7,313 | 8,182 |
| Fianna Fáil | Brian Ó Domhnaill[13] | 21.33 | 7,344 | 7,358 | 7,636 | 8,069 |
| Independent | Thomas Pringle[14] | 9.99 | 3,438 | 3,491 | 3,763 | |
| Labour Party | Frank McBrearty, Jnr[15] | 9.78 | 3,366 | 3,375 | | |
| Independent | Anne Sweeney[16] | 0.39 | 133 | | | |
| Electorate: 62,299 Valid: 34,424 Spoilt: 484 Quota: 17,213 Turnout: 57.39% |
Some key points to note:
- Donegal South West is just one of 43 constituencies for the Dail - the Irish Parliament. It would be more rural, conservative, and nationalist than the average.
- Traditionally it is a Fianna Fail stronghold. At the last general election FF got 50% of the vote and 2 of the 3 seats - including one for the Tanaiste - deputy Prime Minister - Mary Coughlan.
- The turnout, at 57%, was very high for a bye-election, particularly as a general election is expected in the next couple of months - which means all three seats will be up for grabs. This cannot therefore be considered a freak result caused by a low poll.
- FF and Fine Gael, the two conservative parties got a combined vote of only 40% of the vote. Traditionally they would have won c. 90% of the vote and all three seats between them.
- If the bye-election result is repeated in the general election, Sinn Fein, FF and FG will win one seat each.
- Labour's vote is up from 3% (in the last General Election) to 10% - which is not enough to challenge for a seat - unless they get the bulk of SF's Surplus (which is SF's vote of 40% less the 25% quota for election in a 3 seat election = 15% and also the Bulk of the Independent Thomas Pringle's 10% of the vote - assuming the Labour candidate manages to poll more votes than him next time around. It's a long shot!
- However Labour traditionally has virtually no presence in the very rural North West of Ireland, so this result is not necessarily representative of how it would do throughout the country in a General election.
- A huge amount depends on whether the Budget is passed, how it is passed (with or without FG abstention) and how the Budget and 4 year plan is perceived by the electorate. However present indications are that the Government is being held directly responsible for the fiasco and will suffer a devastating defeat. FF lost 30% of its first preference vote in Donegal SW, nationwide polls have been showing it in the low 20's compared to its traditional strength in the mid 40s.
There will be blood. Hopefully most of it will be metaphorical. But how might this all play out?
It looks likely that the Government will agree a deal with the IMF/ECB and try to spin it as a good deal for Ireland. It will then try to pass a draconian budget as the first step towards Ireland fulfilling its part of the bargain. That Budget will likely be defeated unless Fiue Gael, the conservative opposition party abstain. If they do, they are likely to be tainted with the fall-out and Labour could well end up as the largest party at the General election to be held early in the new year.
Labour will then lead a Government and try to negotiate a better deal - using the threat of default as a lever to force the IMF/ECB to be more flexible. The ECB/IMF will call foul, but a new Government elected on a new mandate may not consider itself bound by the undertakings given by its predecessor - particularly the undertakings given by Brian Lenehan that bond-holders would have their investments guaranteed in full.
