Irish PM Brian Cowen to call new year election

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Media captionProtesters have marched on the Irish parliament building in Dublin

Irish Prime Minister Brian Cowen has said he will call a general election in the new year following a day of political turmoil over an EU-led bail-out of the country's ailing economy.

He rejected opposition calls for a snap election, saying the country's crucial budget had to be passed first.

Earlier, the Green Party - junior partners in the governing coalition - called for a January election.

The government has accepted up to 90bn euros (£77bn; $124bn) in loans.

In return, the government is to publish a four-year economic plan on Wednesday and is drawing up an austerity budget, to be unveiled on 7 December.

"We believe that there is a clear duty on all members of Dail Eireann [lower house of parliament] to facilitate the passage of these measures in the uniquely serious circumstances in which we find ourselves," said Mr Cowen after an emergency meeting of cabinet members.

"The political and financial stability of the state require no less. It is my intention, at the conclusion of this budgetary process with the enactment of the necessary legislation in the New Year, (to) then seek a dissolution of Dail Eireann and to enable the people to determine who should undertake the responsibilities of government in the challenging period ahead thereafter."

He called for MPs to support the budget and the four-year plan - aimed at bringing stability to the economy.

However, the BBC's Mark Simpson in Dublin says that, despite Mr Cowen's statement, MPs could still force him from office before the budget is agreed.

The Labour Party and Fine Gael - the Republic of Ireland's two main opposition parties - earlier called for the immediate dissolution of parliament.

Fine Gael leader Enda Kenny said in a statement: "What is needed now is an immediate general election so that a new government, with a clear parliamentary majority, can prepare the four-year economic plan, complete negotiations with the EU and IMF, and frame a budget for 2011".

Labour leader Eamon Gilmore said it was "essential that we have a new government elected as soon as possible".


Mr Cowen's statement came at the end of a day of commotion in Irish politics.

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Media captionIrish PM Brian Cowen: "The vital national interest requires that financial stability be achieved"

There were violent scenes in Dublin when police removed demonstrators from the grounds of Government Buildings in Dublin, who then tried to hold a sit-down protest.

Next month's austerity budget will set out 4.5bn euros of spending cuts and new or increased taxes designed to raise 1.5bn euros.

Adding to the government's woes on Monday, two independent MPs helping to prop up Mr Cowen's crumbling coalition said they could not give a commitment to support the budget unless the opposition had a hand in drafting it.

Even with Green Party support, the coalition has just a three-seat majority in parliament and faces a by-election in one of those seats on Thursday.

Green Party leader John Gormley did not say the party was pulling out of the coalition but he made a number of demands and said a general election date should be set for the second half of January.

Mr Gormley, the current environment minister, stressed the election should only be held after the 2011 budget had been passed.

Our correspondent says the most likely shape of the next government is a right-left coalition between Fine Gael and Labour.

What went wrong in the Irish Republic

The 1990s were good for the Irish Republic's economy, with low unemployment, high economic growth and strong exports creating the Celtic Tiger economy. Lots of multi-national companies set up in the Republic to take advantage of low tax rates.
At the beginning of 1999, Ireland adopted the euro as its currency, which meant its interest rates were set by the European Central Bank and suddenly borrowing money became much cheaper.
Cheap and easy lending and rising immigration fuelled a construction and house price boom. The government began to rely more on property-related taxes while the banks borrowed from abroad to fund the housing boom.
All this left Ireland ill-equipped to deal with the credit crunch. The construction sector was hit hard, house prices collapsed, the banks had a desperate funding crisis and the government was receiving much too little tax revenue.
The economy has shrunk and the government has bailed out the banks. A series of cost-cutting budgets have cut spending, benefits and public sector wages and raised taxes. But there are still doubts about future government funding.
The main concern for the Republic's economy is its banks, most of which are now controlled by the government. They have had to borrow at least 83bn euros (£71bn) from the European Central Bank because other banks will not lend to them.
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Analysts say that among the favourites to become next leader of Mr Cowen's Fianna Fail party is finance minister Brian Lenihan, who is battling cancer on top of his demanding job.

European shares and the euro both fell following the election call from the Green Party.

They had risen in earlier trading after the announcement of the bail-out, final details of which are yet to be worked out.

The UK is expected to contribute about £7bn (8bn euros) of the bail-out. Chancellor George Osborne said: "Ireland is a friend in need, and we are here to help."

The crisis in the Irish Republic has been brought on by the recession and the almost total collapse of the country's banks.

Once known as the Celtic Tiger for its strong economic growth - helped by low corporate tax rates - the country has experienced a property bubble burst, leaving its banks with huge liabilities and pushing up the cost of borrowing for them and the government.

What do you think of the bail-out? What kind of conditions should be attached to it? Are you in Ireland? How does the current economic situation affect you? Send us your comments using the form below.

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