(Bloomberg) — Ireland’s two dominant political parties will return to power for another five-year term after agreeing a new coalition deal following weeks of negotiations.
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Fianna Fail and Fine Gael had been in talks since an election in late November, when they fell just short of a majority of seats in parliament. To reach that number, they’ve secured the backing of a number of independent lawmakers.
In a statement on Wednesday, the parties said their focus will be to “deliver continued progress on the economy, infrastructure, housing and public services.”
The deal means Ireland is an outlier in the recent election trend of incumbents getting dumped out of office. While the country has, like many others, seen a backlash against immigration, there’s no large single right-wing group that has been able to take advantage and seriously challenge the main parties. In addition, Fianna Fail and Fine Gael were able to win over voters with a giveaway budget weeks before the vote.
The country is running a huge surplus thanks in part to soaring tax revenue from US firms with operations in Ireland. But that enviable position — boosted by a record €39 billion ($40 billion) in corporate tax receipts in 2024 — is volatile, and the finance ministry has warned that the state can’t count on that income indefinitely.
Such concerns have been exacerbated by Donald Trump’s election as US president. Howard Lutnick, Trump’s pick to lead the Commerce Department, has previously singled out Ireland for criticism, saying it ran a surplus at the US’s expense.
“The broader political geopolitical environment of what’s happening in the US in particular is likely to feature” in the new term, said Aidan Regan, Professor of Political Economy at University College Dublin. “I suspect we will see a more prudent government now that Trump is in office, and they would probably be a little bit more willing to spend and invest more if he wasn’t in office.”
In the election, Fianna Fail won almost 22% of the vote, followed by Fine Gael on 20.8% and Sinn Fein on 19%. Labour and the Social Democrats were just below 5%.
While Labour and the Social Democrats both increased their number of seats, the grouping of independent members of parliament is a more attractive coalition partner. Unlike a third party, those lawmakers will focus on local issues and are less likely to have demands around national policy, giving Fianna Fail and Fine Gael more freedom to implement their agenda.
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There has been controversy around the deal because of the involvement of lawmaker Micheal Lowry, who is the lead negotiator for the Regional Independent Group. The former Fine Gael minister was named in an inquiry into payments to politicians more than a decade ago.
The Moriarty tribunal, investigating Lowry’s involvement in the awarding of a state mobile phone license, said that he had received payments “demonstrably referable” to the winning of the license. Lowry denies wrongdoing.
With a deal in place, it means the government will be ready for the resumption of parliament on Jan. 22. The negotiations had focused not just on the new policy agenda, but also on the allocations of ministerial positions.
A “rotating Taoiseach” arrangement is the likely outcome, with Fianna Fail leader Micheal Martin and Fine Gael’s Simon Harris taking turns in the role. With Fianna Fail now the slightly larger party, Martin is expected to go first. He was prime minister under those terms before, between 2020 and 2022.
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