POST ELECTION CHALLENGES
EXAMINER ARTICLE DEC 1st
The 2024 general election campaign has been unusual on a lot of different counts, not least due to the contrasting campaign performance of Fine Gael on one side and Sinn Féin ands Fianna Fail on the other. The three parties went into election day neck and neck and voter volatility created massive uncertainty amongst the expert pundits. However, it was clear that the three main parties had a strong desire to attain power, just as Fianna Fáil, the Progressive Democrats and Fine Gael had back in 2007. In the event, Fianna Fáil and the Greens formed a government on that occasion and there began four calamitous years for Ireland, which culminated in Fianna Fáil being unceremoniously dumped from power in 2011. Arguably, the 2007 election was the one to lose given the unprecedented national crisis that engulfed in the country over subsequent years, which culminated in Ireland being forced into the three-year IMF bailout programme in December 2010.
Some analysts have suggested that the 2024 election has resonances with 2007 and that this is an election to lose. To my mind, that analysis seems overly pessimistic as the challenges facing Ireland today are very different from those faced in 2007, but there is still cause for concern and caution about the future.
The election manifestos of the three main political parties certainly did not give any indication of an expectation of tougher times ahead. Fine Gael made spending commitments of over €28 billion and tax reduction commitments of €6 billion; Fianna Fáil made spending commitments of over €36 billion and tax reduction commitments of around €3 billion; and Sinn Féin made spending commitments of over €46 billion and tax reduction commitments of €3 billion, or at least that is what the manifestos appear to suggest. One way or another the three main parties were falling over each other to make extravagant and imprudent promises and there was little indication of more straitened times ahead.
Based on what we know now, life for the next administration is likely to be more challenging and riskier. Domestically, the ongoing crisis in housing costs will continue to have the most visible impact on popular sentiment and people will continue to justifiably berate those in power for the abject failure in housing delivery over the past decade. The ongoing and intensifying travails of the SME sector will also attract more attention, at least from the public. We are seeing more and more SMEs being forced out of business because of the escalation in the costs of doing business, much of which has been driven by official policy initiatives, not least in relation to the labour market. Official analysis showed what the impact of various recent labour market measures would be on labour costs for SMEs, but nobody seemed to care, apart from the SMEs themselves. Over the coming year pension auto-enrolment will also be introduced, which will be good for pension coverage and the pensions industry, but which will add further pressure to the costs of doing business. Is anybody worried other than the SMEs themselves? I fear not, if Budget 2025 is anything to go by.
External developments will pose an even greater threat to the wellbeing of the country. Politically and economically, Germany and the euro Zone in general are in trouble. The recent spike in French bond yields on the back of political uncertainty for example, is reminiscent of 2012. However, Donald Trump potentially represents the greatest existential threat to Ireland. We should of course judge him by what he does rather than what he says, but if he does half of what he has threatened in relation to tariffs, corporation tax, and free-trade in general, then that would be bad news for the global economy in general, but Ireland is also in a very vulnerable position due to its ridiculous corporation and income tax dependence on a small number of large multi-national companies. One shouldn’t be too fatalistic about the potential impact on Ireland’s multi-national sector of what Trump might do, but attracting new FDI, which was already becoming more challenging because of domestic factors, is likely to become even more challenging. Ireland is once again akin to a bird flying on one wing but let us hope it doesn’t get cut off as happened in 2007.
Life for the next government promises to be both interesting and challenging, but the sometimes-gullible electorate should not be expecting the parties of government to deliver on their reckless promises.