MercoPress. South Atlantic News Agency

Irish PM will call early election after austerity budget is passed

The Greens abandoned PM Brian Cowen coalition (Photo AP)

Irish Prime Minister Brian Cowen defied mounting pressure to quit and announced Monday he would stay in office until parliament passed an austerity budget needed to secure an IMF/EU bailout and then call an early election.

European partners and the IMF agreed in principle to rescue Ireland with an expected 90 billion Euros in loans to tackle a banking and budget crisis that has aroused public fury.

Ireland's Greens, junior partners in Cowen's coalition, called for an early election in January as soon as the international bailout was in place.

Then two independent lawmakers on whom the government relies for support said they were unlikely to support the 2011 austerity budget, due to be unveiled on December 7.

With the main opposition parties calling for an immediate election, this meant the budget was unlikely to pass, and the EU/IMF aid package that will be contingent on it was likely to be delayed.

But Cowen appeared to be daring the opposition parties, Fine Gael and Labour, to block the budget -- and hold up the aid as well as the promised election -- when they could let it pass by abstaining.

A top Euro zone official said the first loans to Ireland could flow in January, but financial markets turned negative as investors assessed the new political uncertainty and the risk of pressure spreading to other vulnerable EU countries.

News of a bailout for Greece last May slashed the yield on Greek 10-year government bonds by 4.5 percentage points, halving the premium that investors required to hold Greek debt rather than low-risk German debt.

But Irish government debt prices have barely reacted to news of the latest bailout. In late European trading, the latest Irish 10-year bond was yielding 8.34 percent, over 5.5 points more than the German equivalent.