- Associated Press - Sunday, January 16, 2011

DUBLIN (AP) — Irish Prime Minister Brian Cowen announced Sunday he won’t resign despite intense criticism of his management of the country’s European-record deficit and its international bailout.

Mr. Cowen’s declaration followed several days of talks with lawmakers in his Fianna Fail party. Many wanted him to quit immediately so that a new leader can lead the party into a spring election that, under Mr. Cowen’s leadership, it is widely expected to lose.

But in a trademark defiant performance, Mr. Cowen said he instead would mount a motion of confidence in his own leadership Tuesday at a meeting of party lawmakers. He said he wasn’t willing to wait indefinitely for one or more of his Cabinet colleagues to mount a direct challenge to oust him.

Mr. Cowen said he was confident of winning the secret-ballot vote and lead Fianna Fail to a seventh straight election victory. Fianna Fail, which means “soldiers of destiny” in Gaelic, has governed Ireland almost continuously since 1987 but has plummeted to historic lows in recent opinion polls.

Mr. Cowen’s determination to stay leaves unsettled the question of whether his government will survive long enough to pass the emergency deficit-slashing legislation required by the 67.5 billion euro ($90 billion) bailout from the European Union and International Monetary Fund.

Fianna Fail rivals quickly could pursue a no-confidence motion to try to oust him. Among those who have publicly voiced a desire to replace Mr. Cowen are Finance Minister Brian Lenihan, Foreign Affairs Minister Micheal Martin, and Arts and Tourism Minister Mary Hanafin.

Opposition leaders planned to press ahead with their own no-confidence motion in parliament against Mr. Cowen — and pleaded for Fianna Fail to declare an election date.

“The longer (the Irish government) stays in power, the greater the damage that is being done to the economy and to our international reputation. This government should go,” said Gerry Adams, leader of the Irish nationalist Sinn Fein party.

Mr. Cowen rose to power in June 2008 as Ireland‘s 13-year Celtic Tiger economic boom was giving way to a property-market implosion and banking crisis. He has faced rising accusations in recent weeks of making decisions that benefited corrupt bankers far more than taxpayers, who have been burdened with a bank-rescue bill expected to top 50 billion euros ($65 billion).

The pressure for Mr. Cowen’s removal flared last week when a new book revealed that Mr. Cowen held several dinners and social events, including a daylong golf outing, with top bankers in the weeks before his government decided in September 2008 to insure all of the borrowings of Dublin banks — an internationally unprecedented move at the time.

The blanket guarantee of the banks failed to prevent most of those banks from facing collapse as their loan books — heavily exposed to runaway property markets in Ireland, Britain and the United States — began to suffer massive defaults.

Ireland has nationalized four of the six Irish-owned banks and repaid tens of billions to bondholders, international investors who normally would be expected to suffer losses when a bank fails.

Ireland spent two years trying to fund the bank bailouts itself, but the cost drove Ireland‘s 2010 deficit to 32 percent of gross domestic product, a postwar European record. Even excluding the exceptional bank-bailout costs, Ireland spent more than 50 billion euros ($66.9 billion) last year but collected just 31 billion euros ($41.5 billion) as unemployment soared and taxes from property sales slowed to a trickle.

In November, as the state-owned banks found themselves unable to borrow on open markets, the European Central Bank and International Monetary Fund stepped in to insist that Ireland negotiate a multiyear loan deal. Under terms of the deal, Ireland must slash 15 billion euros ($20 billion) from its deficit spending over the coming four years and is imposing the harshest cuts this year.

The parliament already has approved bills that will slash welfare benefits and the minimum wage, raise school fees and cut the salaries of Cabinet ministers. But the toughest measures — to increase income taxes across the 2 million-strong work force, raising effective tax levels to 41 percent or more — have yet to be approved in the 2011 Finance Bill.

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