Irish political update: Options becoming limited as Government formation talks continue

Government formation continues to move at a snail’s pace – while options are becoming limited as Labour, Social Democrats and Aontú take themselves out of the equation.

Also, is Fianna Fáil facing its biggest challenge yet?

Government Formation

Talks continued this week with housing, justice, Europe and Northern Ireland on the agenda for discussion. While talks are confidential, it is our understanding that the controversial Judicial Appointments Bill was placed on the table for discussion by Leo Varadkar – leading many in Fianna Fáil to question his motives considering Fine Gael’s opposition to it last term.

In general the talks themselves are considered to be progressing “positively” but outside, some Fianna Fáil and Fine Gael TDs, Senators and Councillors from rural parts of the country fear their concerns are not being heard and that a deal with the Greens could prove to be damaging to the livelihood of their constituents.

Options for Government formation are certainly waning as both Labour and the Social Democrats have now taken themselves out of the equation. The Green Party negotiation team, led by Deputy Leader Catherine Martin, will surely be aware of the signal this public rejection could send to the more socialist or left leaning of the Green Party members. This means any deal that emerges will need to be shaped in such a way that it is worthy of ratification and is truly a positive move forward in achieving the wider Green Party agenda – an agenda that included an end to Direct Provision, the building of public housing on public land, and ambitious science-based targets for new climate action measures.

Fianna Fáil arguably faces the biggest battle over the coming weeks: a battle to maintain relevance as the Caretaker Government saturates the airways, a battle to ensure all its TDs are onboard with the deal and a battle to get the deal passed by its membership. The latter is certainly an uphill one.

COVID-19 Economic Response

This week Minister Humphreys was before the Dáil again answering questions on business support measures. While she did say the Restart Grant will be announced today, the Opposition pushed back and said the manner of which it is being quantified is wrong as it is based on the commercial rates paid in 2019, which would be very small for SMEs in rural parts of Ireland.

Industry continues to argue that the Government is not doing enough to support SMEs. In the last two weeks we saw alternative plans being put forward by Ibec, the Small Firms Association and a new group which is an amalgamation of the Irish Small and Medium Enterprise Association (ISME), the Restaurants Association of Ireland (RAI) and Retail Excellence Ireland (REI).

Ibec expects the economy to shrink by 10% and calls on a future Government to commit a further €15 billion stimulus package of supports for businesses, in addition to the measures already introduced by the Government to support the economy. The group want to see this stimulus package plan rolled out within the first 100 days of the new Government.

All plans call upon the Government to continue to enhance the suite of liquidity supports for businesses, write-down some debts for businesses, extend the exemption from commercial rates, and provide cash grants to SMEs to aid required social distancing investments. Many are looking for the reintroduction and expansion of the 9 per cent VAT rate for the hospitality sector which was introduced after the last financial crash and the establishment of a Commission on Taxation to address challenges brought by the crisis and other longer term tax issues such as environmental taxes.

Fianna Fáil

The Soldiers of Destiny are certainly under pressure.

They are unsure of their platform considering they won the most seats in the election, but by default as Sinn Féin did not run enough candidates, and then with only a slim majority, Sean O Feargháil decided to rerun for Ceann Comhairle, bringing the numbers to 37 apiece.

From a Government formation point of view, the membership appears split as some argue the party should be dealing with Sinn Féin, others say they should be staying in opposition and some they should proceed with the deal. Regardless of the position, what is unanimous is the party is nervous.

Going into Government leaves Sinn Féin as the main opposition and gives them a platform and fuel to overtake Fianna Fáil. Not going into Government plays into the rhetoric that Fianna Fáil is becoming irrelevant as they begin a third term in Opposition, but not as main opposition.

Separate to all this, the Party knows it has an identity crisis. Fine Gael will always appeal to the right, which is relatively unpopulated. Fianna Fáil, which falls into centre-left, is being squeezed by Sinn Féin, Social Democrats, Labour and other smaller parties.

Micheal Martin has a number of battles ahead. To secure the support of his Parliamentary Party, then his membership, to deliver the deal and finally to point Fianna Fáil in a new direction that will safeguard it into the future – not an easy task and all to be completed from a safe social distance.

The next few weeks will be critical for the party in the short-term but also will be very telling about its future direction.

Looking ahead

Talks continue between Fianna Fáil, Fine Gael and the Green Party and are expected to conclude before the end of the month with a programme for Government to then be ratified by each party. If an acceptable deal for each involved does not emerge from talks, then it could very well result in a scenario which includes revisiting the ballot boxes for the second time in 2020.

This is a crucial time for many stakeholders as a Government will be needed if any further legislation is to be passed to deal with the aftermath of Covid-19. If a Government is not formed, it will place legal doubts on the replacement of this year’s Leaving Certificate and delay the €2 billion credit guarantee scheme Irish banks have agreed to for SMEs, and the €2 billion equity investment plan for medium and large businesses, as both require the passing of new legislation.

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