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Ireland is set to hold elections on November 29, where the center-right parties, Fianna Fáil and Fine Gael, are anticipated to take the lead in forming the next government. These two historical rivals have governed together in a coalition alongside the Green Party for the past five years, and recent opinion surveys indicate that they are maintaining strong support as the campaign draws to a close.
The outcome of the election will be crucial as the new leadership will confront distinct economic challenges and opportunities. Ireland currently boasts a budget surplus, a result of its strategic position as a hub for major American technology and pharmaceutical firms. Additionally, a significant financial boost has emerged from a ruling by the European Court of Justice, which mandated that Apple pay back 13 billion euros (approximately $13.7 billion) in taxes to Ireland.
However, concerns loom over how U.S. President-elect Donald Trump might impact this landscape. Observations suggest he may attempt to discourage U.S. companies from utilizing Ireland as a tax haven, potentially redirecting their obligations back to the U.S.
Political Dynamics
As the election approaches, it appears that the two major parties are on a path to coalition government once more, despite a recent downturn for Fine Gael in the latest poll conducted by the Irish Times/Ipsos B&A. Fine Gael’s support has dropped by six points to 19%, while Fianna Fáil’s has remained slightly ahead at 21%. Republican Party Sinn Féin holds steady at 20%, with independent candidates at 17%. Given Ireland’s proportional representation voting system, a coalition government is highly likely if no party gains an outright majority.
The anticipated policy direction remains uncertain, primarily due to the expected influence of Fianna Fáil and Fine Gael. A pressing issue that needs addressing is the housing crisis. The Central Bank of Ireland has recently highlighted a significant long-term housing supply shortage, projecting a need for approximately 52,000 new homes annually to meet future demands. The lack of affordable housing options has pushed homelessness in the country to alarming numbers, with nearly 15,000 individuals in emergency accommodations reported in September, including a considerable number of children.
Even amidst these challenges, Ireland continues to present an attractive job market for workers, particularly due to its position as the only English-speaking nation within the European single market and its relatively youthful, well-educated workforce, as noted by economist Emma Howard from TU Dublin.
Fiscal Outlook
On the financial front, Ireland’s economy is showing signs of resilience, especially over a decade following the state’s bailout by international entities such as the IMF and European Commission. The country has recorded a budget surplus in the recent fiscal years, with Finance Minister Jack Chambers indicating a projected surplus of up to €24 billion this year, partly attributed to the ECJ ruling on Apple.
In mid-November, S&P Global Ratings upgraded Ireland’s outlook from stable to positive, hinting at a potential upgrade to AAA ratings if economic recovery strategies continue to strengthen fiscal buffers. However, a cautionary note emerged as analysts pointed out that a substantial share of corporate tax revenues—nearly half—was reliant on ten foreign multinational companies, primarily U.S.-based.
Moreover, Howard notes that excluding extraordinary corporate tax revenues, the country could reveal a budget deficit, with projections indicating a €50 billion shortfall from 2024 to 2030.
Implications of Trump’s Presidency
Donald Trump’s forthcoming return to the White House has sparked global anxiety, particularly regarding his “America First” policy agenda. This could jeopardize Ireland’s favor as a tax destination for American corporations, especially with Dublin’s low corporate tax rate being a significant enticement. The incoming Commerce Secretary, Howard Lutnick, has already signaled potential backlash against what he termed as Ireland’s trade surplus with the U.S., labeling it as unacceptable.
Lutnick is poised to take on added responsibilities in the new administration, particularly concerning the U.S. Trade Representative’s office. Notably, Trump himself has maintained a vested interest in Ireland, owning a golf resort on the nation’s west coast since 2014 and leveraging it during his previous terms in office.
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