King Cronyism

In an article titled “Voted Off the Island” on 11/23/10, days before Ireland received its €85 Billion bailout from the EU/IMF, we discussed the paper-thin credibility of Irish Prime Minister Brian Cowen’s government.  Cowen and Fianna Fáil have seen their credibility eroded further in recent weeks as revelations of Cowen’s golf and dinner outings with then-Anglo Irish Bank chairman Sean FitzPatrick in the run up to the 2008 state banking guarantee have emerged. Cowen was once again in the limelight yesterday evening after winning his party’s confidence vote on his leadership, defeating his major opposition within the party, Foreign Minister Michael Martin.


Despite Cowen’s victory in the secret ballot, including vocal support from Finance Minister Brian Lenihan, support for Fianna Fáil, in power since 1997, has fallen to 14%, while support for Fine Gael, the main opposition party, stands at 35%, according to a poll this month by Red C for bookmaker Paddy Power Plc.


As the markets continue to confirm, Europe’s risk premium continues to heighten (over the long term) due not only to its sovereign debt crisis, but also the Crisis in Leadership to right these sinking ships. We continue to highlight Italy and Spain on these fronts, however suffice it to say that Ireland’s sovereign and banking issues are far from rear-view despite the bailout. As Ireland wrestles to elect a new leader over the next weeks, we’d expect investor (and market) confidence to continue to shake.


For additional perspective on Cowen’s win and the country’s uncertain political state we include commentary this morning from our restaurant analyst and Irish national Rory Green below:


“Cowen’s party, Fianna Fáil, is “staggering toward election oblivion” according to the Irish Times today, and I definitely agree.  


As we have discussed with clients in the past, internal events within Cowen’s party are unlikely to impact the outcome of the upcoming election, which increasingly looks like it will be held sometime in March.  While members of opposition parties were critical of the terms of the EU-IMF bailout, I believe it is unlikely that new leadership will necessarily act as any sort of catalyst with respect to that arrangement.  The country is handcuffed with respect to its monetary policy and there seems to be a lack of ideas or options forthcoming in the short term, at least. 


With a plethora of topics to attack the incumbent government on, I believe opposition parties will not risk suggesting any radical measures regarding the bailout in the context of the election.  Polls have shown support for the bailout among Irish people and populist angst is already aimed squarely at Ireland’s Deficit in Leadership, particularly Fianna Fáil and those deemed responsible for the banking sector crisis.”


Matthew Hedrick



King Cronyism - cowen

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