Irish prime minister faces early election over bailout

Associated Press

DUBLIN

The Irish government stood on the brink of collapse Monday, a day after being forced to accept a massive bailout from the European Union and the International Monetary Fund.

Irish Prime Minister Brian Cowen said he would call an election for early next year, once Ireland passes an emergency budget and finalizes the bailout.

The admission represented a huge political blow to Cowen, who only days ago was denying even the need for a bailout to solve the problems brought on by Irish banks’ reckless speculation in overpriced real estate.

His coalition partner, the Green Party, forced his hand, saying it would quit the government and demand an election in January. Cowen resisted pressure to resign immediately, but soon even lawmakers in his own Fianna Fail party also called on him to go.

Cowen said he could not quit now because that would delay Ireland’s deficit-slashing 2011 budget and the bailout negotiations — and jeopardize efforts to sustain the nation’s cash-strapped banks.

He insisted he would step down and face re-election only after Ireland’s most brutal budget in history is passed and talks with the International Monetary Fund and the European Central Bank produce a bailout deal expected to approach $135 billion.

The EU’s economic and monetary-affairs minister said nothing should slow Ireland’s passage of its budget and the negotiation of a bailout.

“It is essential now to stop the financial bush fire concerning Ireland before it becomes a European-wide forest fire,” said Olli Rehn, the EU minister most closely involved in helping eurozone governments control their deficits and finance their debts.