THERE are 81 prayers in the holy rosary and, appropriately enough given the country is operating on a wing and a prayer at the moment, 81 days until budget day on 2 December. It is no exaggeration to say that the next 11 weeks have the potential to shape Ireland for a generation. The government and the country have four enormous hurdles to clear in that time frame. The Lisbon referendum, the re-negotiation of programme for government, the Nama legislation and an estimates process/budget that will involve the biggest cutbacks in the history of the state. Failure to clear any of those hurdles will inevitably result in the end of the government and, arguably, create huge uncertainty for Ireland Inc. Our political team of Shane Coleman and Conor McMorrow examine in detail what's in store over the next 81 crucial days.
Taoiseach Brian Cowen does "not contemplate defeat" in the second Lisbon referendum in 20 days time. He has claimed the question of him resigning in the event of such a defeat does not arise.
"Ireland needs Europe" and "We're Stronger with Europe", say his party's campaign slogans. But the stark reality for the government is that Cowen needs Lisbon and his leadership will be marginally stronger with a Lisbon win under his belt.
A Lisbon defeat could send Cowen down in the annals of Leinster House as the man who held the office of Taoiseach for the shortest period in history. The stakes are that high for him personally.
Early this year, three Irish Times/MRBI opinion polls suggested a 'Yes' result was inevitable but last weekend's poll put the gap between the 'Yes' and 'No' camps at just 17 percentage points. There has been an eight-point slippage for the 'Yes' side since May with the latest poll showed 46% saying they would vote 'Yes' and 29% on the 'No' side.
The poll potentially has parallels with a lethargic Leaving Certificate student getting mediocre results in the 'mock' exams at Easter and knuckling down to do better in the real thing. As the slippage in support may have the effect of putting the wind up the 'Yes' side so they will put the work in and do better when it really matters.
A government insider said: "It is going to be an uphill struggle for the next few weeks. It is going to be tough as there is so much anti-government feeling out there.
"We are not going to be as complacent this time around because we were too complacent during the first campaign. In our favour, there is no coherent argument on the 'No' side this time as Joe Higgins and Sinn Féin have both discredited Cóir."
Sources have told the Sunday Tribune that anti-Lisbon group Cóir is now viewed in government circles as the most fervent opposition to the 'Yes' side. It is believed that it has a war chest of up to €400,000 to spend on the campaign whereas others on the 'No' side, such as Joe Higgins, are running their campaigns on a shoestring.
Despite major questions surrounding the veracity of the messages on Cóir's posters, it is seen to be making an impact and one government insider remarked: "It's like the insane versus the sane and the insane are making the best arguments."
However, in the absence, until now at least, of Declan Ganley's big-money Libertas this time around, Lisbon II has been a bland battle that could be viewed as a phony war between the 'Yes' side and an incoherent 'No' side.
For two days last week, the 'battle' was reduced to a minor row between Joe Higgins and the general secretary of the Civil and Public Services Union (CPSU), Blair Horan, over a textual error on Higgins' website.
Speaking to the Sunday Tribune last week, PR guru Terry Prone said: "Last time, you had two main people around whom the 'No' campaign coalesced – Mary Lou McDonald and Declan Ganley.
"Their relatively competent media presence distracted from the loose, fragmented and mutually contradictory group making up the 'No' side. Now that they're not at the forefront, a less compelling coalition is coming to the fore – entertaining alternative thinkers, rather than individuals leading a movement. The 'No' campaign is doing the one thing a losing campaign always does, which is to attack the media.
"The nature of the support for the 'Yes' side is different, this time out. Last time, white-collar middle management was into self-expression. This time, they're saying 'We lose Lisbon, we're f****d'. Converts are able to change their opinion without a change of principle: 'I voted no last time over the commissioner, but now that's sorted…'
"Last time, the 'No' vote was constantly stimulated, the 'Yes' side under-stimulated. The reverse is happening, this time around."
Twenty days out from polling day during the first Lisbon referendum, the 'Yes' side found themselves on the back foot whereby they were explaining 'red herrings' such as issues relating to abortion and conscription to an EU army. This time, a government source said: "We are hoping that common sense will prevail and people will realise the economic reality that we need to say 'Yes' to Lisbon in the interests of our economic future."
Prone said: "Last time, the 'No' campaign had the perfect storm – a heavily funded campaign, Ganley a new force, increase in support for Sinn Féin and the 'No' vote correlated nicely with Sinn Féin's popularity.
"This time, the two people who led last time have effectively been voted out of credibility [McDonald and Ganley], the economy is on its knees and we're hearing repeated references to how helpful the EU is being to Ireland."
She added: "The one thing lacking, still, on the 'Yes' side is a coherent constant evidenced statement about why the treaty is good. The 'Yes' side is spending too much energy explaining why Europe is good, but hasn't established an inarguable case for the benefits of the treaty itself. If they did, they'd romp home. As it is, the margin may be tighter."
The current government is probably the most unpopular government in the history of the state. The public wants blood on a plate and the latest Irish Times/MRBI opinion poll found that 75% of those polled want a change of government. If the electorate decides to use Lisbon as a vehicle to punish the government then the referendum will be lost.
That said, in the absence of a distinctive leader on the 'No' side in the Declan Ganley mould, it looks like the 'Yes' side will shade it. As Fianna Fáil supporters may be reluctant to go canvassing in the current climate, a key to the a Lisbon success will be whether or not Fine Gael and Labour voters rally to their leaders' calls for a 'Yes' vote.
Cowen believes that we have a "discernable electorate" that has the ability to pigeon-hole Lisbon separately to the other contentious issues such as the Nama legislation, the threat of public-sector pay cuts, the Bord Snip Nua report, the Commission on Taxation, and one of the harshest budgets ever looming in December. It remains to be seen if this will be the case on 2 October.
The stakes could not be higher. Speaking at Fianna Fáil's campaign launch, Cowen said: "This is not about the future of the government of personalities. It's about the future of the country.
"It's not politics as usual. We need to focus on the importance of Lisbon at this time. We need to decide what is in our interest as a people, what is the message we want to send [to others in the European Union]." The stakes are as high for Cowen's leadership but, like him or loathe him, there is merit in Cowen's statement that Lisbon is about the future of the country.
Cowen says the Lisbon referendum is not about personalities and he is right. It should not be a referendum on the government. In fairness to the two main opposition leaders, Enda Kenny and Eamon Gilmore, they have been categoric in asking the electorate not to use Lisbon as a stick to beat the government with.
But if Lisbon is defeated on 2 October it is difficult to see how Cowen could continue as taoiseach. The opposition would most likely put a motion of no confidence in front the Dáil in the event of a second Lisbon defeat, on the basis that Cowen's government has twice failed to deliver on a matter of key constitutional importance to the state.
The government could survive such a motion but the blow to its authority would be very difficult to overcome and there may be a need for a general election fought on the issue of our future in Europe. If the referendum is passed it will mark a rare high point for Cowen's leadership.
IN the past, re-negotiations of the programme for government halfway through their term of office have proved pretty straightforward (the exception being in 1991 when the talks between FF and the PDs went down to the wire, saved only by Bertie Ahern's political savvy), but there is a huge added complication this time around. Any renegotiated programme has to receive two-thirds approval from the Green Party membership at a party convention around the middle of October.
In normal circumstances, that would prove straightforward enough – in this day and age, the leadership of most political parties in western Europe are capable of controlling their organisations. But these are not normal circumstances. And with no money in the kitty, it's going to be a big challenge to come up with a deal that will have enough in it to sell to the Green membership, particularly given the grassroot scepticism over the Nama bill. Fianna Fáil's willingness to allow the Greens claim credit for the changes to Nama last week is proof positive that there is an understanding within government that there is no guarantee of getting two-thirds backing for a re-negotiated programme and the Greens have to be seen to score some points.
And the re-negotiated programme will have to include a couple of big wins for the Greens. Some move on banning corporate donations would be a big help, while carbon taxes and moves on developing green-energy jobs are pretty much a given. However, electoral reform and the introduction of a property tax – both apparently on the Greens' wish-lists – look non-starters. Education is going to be a key issue. With more cuts proposed by an Bord Snip Nua, this could be a serious sticking point in the negotiations.
The Greens have played a blinder on Nama, but it's clear Fianna Fáil has been happy to let them do so for the sake of holding the coalition together. More of the same will be required from the talks on the renegotiation of government.
Very hard to know. The Greens hardly want to be seen as the party that walked out of government in the country's hour of need. Nor will they be anxious to face the electorate in the current climate. But getting a two-thirds majority is no easy matter. It should be okay but…
Because without a re-negotiated programme for government, there's no government. That also means no Nama bill and no budget, at least until next year. The upheaval would be enormous.
We are into unknown territory but it seems inevitable that the government would collapse and a general election would be called.
IT'S not too often that a politician can describe a bill as the most important piece of legislation ever introduced in the Oireachtas and not be accused of hyperbole. But when you're talking of the state effectively taking €90bn worth of loans off the balance sheets of the main banks then it's difficult to exaggerate the magnitude of what's being attempted.
Nama is not good news for the taxpayer – that much is certain. It is a result of stupid and irresponsible lending by the banks in recent years, aided by poor regulatory controls. Nama creates enormous exposure for the exchequer. But such is the size of the crisis in the banking system that doing nothing is not an option. While it has become popular to castigate moves to "bail out the banks", unless the banks' balance sheets are cleaned up, they cannot function. And, without a functioning banking system, the economy will grind to a halt and stay that way for years.
So some form of exchequer-funded bail-out is required. The question is whether Nama is the vehicle to deliver that. It is certainly bold and audacious, but its critics also claim that it is a hugely risky venture that will bail out reckless developers and bankers and leave generations to come footing the enormous bill.
Ultimately, everything will come down to the price the state pays for those loans and the level of the so-called 'haircut' involved. Critics insist that the state will fail to take full account of the collapse in property prices and likelihood of depressed prices for many years to come and pay too high a price for the loans, leaving Nama certain to cost the taxpayer tens of billions of euro.
They claim that the government will have to overpay because to pay the current market prices would leave the banks sitting on losses so huge that it would effectively bankrupt them and require the state to step in and pour billions of euro of capital into the banks, effectively nationalising them.
However, the government insists that its valuation will be a fair and accurate reflection of the acquired property's long-term economic value. In certain cases, it says, that will mean paying agricultural-land prices but in other cases – for example properties on which there is already an income stream or those in London or on the east coast of the US – the 'haircut' will be considerably less than short back and sides. The government also argues that safeguards are being put in place – including split payments, involving the use of subordinated debt that will only bear fruit for the banks if Nama makes a return, and a potential bank levy – as a hedge against potentially overpaying for the loans.
The main weakness of the Nama critics is that they have failed to come up with an alternative that is remotely as credible as the asset management agency.
Fine Gael's 'good bank, bad bank' proposal raises far more questions than answers. (How long would it take to set up a 'good bank'? What will happen to the bad banks? How will the good bank raise money? Will bondholders be willing to lend money to the good bank when it has just been asked to take a hit on its previous investments with Irish banks?)
Labour's proposal to nationalise the banks has its proponents. But there are doubts as to whether or not the state would be capable of managing the entire banking system and major question about how such a move would be seen internationally. Even if the arguments against nationalisation are set to one side, there would still be a need for an exchequer-backed mechanism to clean up the banks' balance sheets. Labour argues that at least if the banks were nationalised it would remove the risk of the state overpaying for the loans, as the taxpayer would recoup this when its shares in the banks were sold at a late date.
The suspicion remains though that despite their fierce criticism of Nama, Fine Gael and Labour would be taking exactly the same approach if they were in government. It's fine for an opposition party in the abstract to advocate welching on bond commitments or nationalising the entire banking system, but they would be huge steps for a sovereign government to take.
The other political party in the mix of all of this is the junior coalition party, the Greens. Given that as a party the Greens were consistently warning of excessive development, Nama is tough for the party to swallow, particularly for the grassroots who have been vocal in their opposition to the measure. In order to help sell it to the grassroots, the Green leadership has secured a number of measures – including a windfall tax of 80% on rezoned land, a prohibition on politicians lobbying Nama, a two-tiered payments system to the banks for the loans and a cull of remaining bank directors – but that may not be enough to convince the Nama-sceptics in the party. However, they would need to secure two-thirds support among party members for any motion against Nama to derail the legislation.
There is no question that finance minister Brian Lenihan has been the most impressive participant in the debate. Fine Gael has been all over the place with its alternative proposal hugely undermined by highly respected former leaders Garret FitzGerald and Alan Dukes coming out to back Nama, a view that is apparently privately shared by a number in its parliamentary party. Labour's nationalisation option has its backers. But despite Lenihan's good performance, Nama remains a hugely difficult sell to voters who resent any money being given to the banks.
Despite its unpopularity with voters, Nama looks likely to pass through the Oireachtas. The sceptics in the Green Party are unlikely to have the numbers to challenge the leadership.
Because Nama is about getting the banking system moving again. Without proper functioning banks, economic recovery is impossible.
We're into appalling vista territory. The government would not survive such a defeat, meaning a general election would be inevitable. It would be next year at the earliest before the new Fine Gael-Labour government could deal with the banks. Would the new government go with nationalisation or the good bank-bad bank option or (probably more likely) stick with Nama? The uncertainty would be hugely damaging in terms of the international markets. The share prices of the banks would almost certainly take a dive and the cost of borrowing money for Ireland Inc would rise sharply.
At this stage, it looks the biggest hurdle of the four for the government to jump although compared to Lisbon and Nama, it is arguably not quite as critical for Ireland Inc (though that is a moot point because the huge hole in the budget is going to have to be addressed by which ever government is in power and any suggestion that this was going to happen later, rather than sooner, would spook international markets).
With the government aiming to deliver €3bn in savings for next year, it's difficult to know where to start with the potentially toxic decisions the government is going to have to make in the coming weeks. Child benefit is certain to be taxed, cut or means-tested and watch the storm rage against that decision. A cut in the social-welfare budget of in the region of €1bn looks very likely – will that involve a cut in basic social-welfare rates? A 5% cut, as proposed by An Bord Snip Nua, looks unlikely but don't be surprised to see a reduction of 2% or 3% with the government arguing that this is simply a reflection of the decline in the cost of basic goods and services over the past year. The public-sector pay bill may also need to be revisited despite the fury provoked by the introduction of the pension levy earlier this year. The possibility of a new benchmarking process, that would for the first time allow recommendations of cuts in pay as well as comparing public servants income with their peer groups in other countries, cannot be discounted. But that won't affect December's budgetary arithmetic.
Health spending is likely to be cut by €800m. The education budget is going to drop sharply too and that is likely to mean bigger class sizes, fewer special-needs teachers and the return of third-level fees.
The report from An Bord Snip Nua is likely to have a major influence in the deliberations of government ministers in the estimates process. Not all of its recommendations will be implemented, but the majority of them will have to be if the government is going to succeed in bringing order to the public finances.
Just how much the report of the Commission on Taxation will find its way into the budget is much more open to question. Brian Lenihan has already made it clear that the focus in this budgetary process would be on cutbacks rather than further increases in taxation. Already under enormous pressure, the government is unlikely to go seeking new battles, so the reform of the taxation system advocated by the commission is unlikely to be part of the coalition's short-term plans.
The property tax, certain to provoke the wrath of a nation, however logical it is as a means of taxation, is unlikely to be risked. Carbon taxes will happen because they need to, not least because the Greens will insist on them. But, after that, it's difficult to see any major changes. The temporary levies introduced in the April mini-budget (because it was too difficult to change tax rates mid-year) will be replaced by corresponding increases in the tax rates. But most of the action is likely to be on the spending side of things.
Every department will be affected and there will be so many potential hand grenades that it will be impossible for the government to politically proof the budget. A bitter backlash against the measures is inevitable as there is little evidence that voters are willing to accept that it is impossible to bridge a gap of €20bn in the public finances without inflicting pain on everybody.
It's very early days, but this is a PR battle that the government simply cannot win. It is simply impossible to sell cutbacks in social welfare, education, health and, most of all, children's allowance without causing uproar. It is for that reason that some commentators have been musing that it mightn't be such a bad thing if the IMF did come in as it would be able to implement the radical measures that a democratically elected government could not. If the past year is anything to go by, Fine Gael and Labour will oppose every cutback and will rise further in the polls, even though they will have to make exactly the same decisions if and when they come to power.
Such is the level of the cutbacks, the odds on the government getting the budget through can only be put at 50-50. Fianna Fáil backbenchers, who were bottling it behind the scenes during the pharmacists' dispute, are going to be under ferocious pressure and there are questions as to whether nerves will hold. The Greens, assuming they have agreed a new programme for government, should be tied in, but cuts in education in particular are going to be very hard to swallow. And the independent deputies will also be watching events very closely. With the government's majority down to the bare bones, it is going to a hugely tricky exercise to come up with the requisite cutbacks and at the same time the Dáil votes.
There are 20 billion reasons why the stakes are so high. Unless the gap between expenditure and income is addressed, the country runs the risk of bankruptcy and the prospect of an IMF intervention.
There will be a general election, although it seems unlikely this could happen before Christmas. Fine Gael and Labour would unquestionably win that election. Once in government, they would be faced with the prospect of introducing the very type of budget they were so bitterly opposing the previous December. It might just suit the opposition if the government was to get this budget through, although there is a view that if the coalition survives until December then it will run for another couple of years. The political uncertainly may also cause concerns on the international markets, where Ireland needs to borrow billions over the coming 12 months and, at the very least, any new government would have to demonstrate they would be willing to take the tough decisions.