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M. Continuo

Irish government expected to survive no-confidence vote


    DUBLIN (Reuters) - Ireland's government is expected to survive a motion of no-confidence on Wednesday but political uncertainty will linger due to unease in the junior coalition party and backbenches about tough fiscal measures ahead.

    Prime Minister Brian Cowen can rely on the support of the Greens during the important vote but the party has warned that another austerity budget in December could make their partnership difficult.

    Investors are worried that political pressure in the aftermath of humiliating government losses in local and European elections will discourage Cowen from unpopular spending cuts to tackle the worst budget deficit in the eurozone.

    They are also concerned about the amount of debt Dublin will need to raise to cleanse its banking sector of soured loans following the collapse of a local property bubble.

    "The confidence that can be displayed in this government is on the basis of our preparedness to take the decisions that have brought short-term unpopularity," Cowen said in defence of his administration during a stormy parliamentary debate.

    MOODY'S REVIEW

    Moody's will conclude its review of Ireland's AAA rating after a visit to the country in the coming weeks but the prospects do not seem rosy after rival agency Standard & Poor's cut its rating to AA, the second reduction in three months, and kept the outlook on negative this week.

    Dublin has to squeeze 8 billion euros in spending cuts and tax hikes, on top of previous measures, in 2010-11 to bring its budget deficit under European Union limits by 2013.

    Local bookmaker Paddy Power has said Cowen is still odds-on favourite to be prime minister next year and the odds on a parliamentary election this year had drifted due to a view that the Greens would not pull the plug on the government.

    The Green's leader John Gormley has said he will consult party members in the next few weeks on their election defeats, which saw their number of councillors cut to three from 18.

    Cowen's Fianna Fail party lost 75 seats on local councils and fell behind the main opposition party for the first time following the June 5 poll.

    Fianna Fail also lost its European Parliament seat for Dublin to a member of the Socialist Party and was roundly routed in two parliamentary by-elections.

    (Reporting by Carmel Crimmins)