Goodbody Economics – Irish Election 2016 – Permutations & possibilities

Dear Members,

Find below and attached Economic research presented by Goodbody for your information.

Next week’s general election could bring about the most fragmented Dáil (Irish Parliament) in Irish history. While the formation of a government will be difficult, the most likely outcome of Fine Gael/Fianna Fáil is unlikely to herald a shift in the policies of recent years. With politics being front and centre for investors in 2016, our note this morning’s looks at the possibilities and permutations.

It’s not the economy, stupid

With one week to go to the Irish general election (February 26^th) risks are rising that the current Fine Gael/Labour government will not gain sufficient support to remain in power. A succession of polls since the election campaign began suggests that the government parties are not reaping the expected rewards from the booming economy.

Fine Gael/Fianna Fáil the most likely next government

While accepting the potential pitfalls of polls, our analysis suggests that the current government will fall short of the 80 seats majority target and may get c.70 seats. There are numerous potential combinations but the most likely coalition combination based upon the latest polls and betting odds is Fine Gael/Fianna Fáil.

FF/FG policies are compatible

FF and FF have stated a preference not to go into government together and maintain that they have different beliefs. However, on the basis of manifestos published by both parties, policies are largely compatible in our view. Such a government would represent a continuation of the pro-business, pro-European policies that has seen Ireland excel over recent decades. Both parties have also had largely consistent views on the structural, fiscal and banking policies of recent years, thus any reversal of these is highly unlikely.

Uncertainty around election outcome, but radical policy shift unlikely

The formation of a government will not be a simple task. In the immediate aftermath of the election, there is likely to be some uncertainty. Although the policies of Fine Gael and Fianna Fáil are compatible, significant differences remain between them. There has never been a coalition of the two parties since the foundation of the Irish State. Despite the risks involved in a potential formation of government, unlike Greece and Portugal, we do not believe that there is a risk of a meaningful shift in policy direction.

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Download Irish Election 2016 – Goodbody.pdf