The Irish government was on the verge of collapse as it faced a vote of no confidence in the deputy prime minister by a party whose votes are critical for Prime Minister Leo Varadkar to pass laws (the government is a minority administration). As Reuters reported late on Thursday, the opposition Fianna Fail party threatened it would put a motion of no confidence in Deputy Prime Minister Frances Fitzgerald on Tuesday - a move sparked by Fitzgerald’s handling of a legal case involving a police whistleblower - and which would breach the "confidence and supply" agreement that allowed Taoiseach Leo Varadkar’s Fine Gael party to form a minority government 18 months ago.
And, as UBS notes, if the government were to lose such a vote, it would have implications within Europe over the Brexit process.
Ireland"s Prime minister Leo Varadkar arrives for an EU Social Summit
Fianna Fail indicated it might withdraw the motion if Fitzgerald resigned, but Foreign Minister Simon Coveney told state broadcaster RTE that Fitzgerald would not resign.
As Politico adds, Fine Gael MPs passed a unanimous motion of support in Fitzgerald at an emergency meeting convened Thursday evening. An unnamed “senior Fianna Fáil” source told Reuters the country was heading “straight toward” a new election after the motion was passed, and added the party would hold a meeting Friday on the matter.
The crisis comes at an awkward time for the UK"s Brexit process, just weeks ahead of a European Union summit in which the Irish government has an effective veto on whether Britain’s talks on leaving the bloc progress as it determines if EU concerns about the future of the Irish border have been met.
While the market reaction to the report has been contained, the Irish 10y yield has moved higher by 4bps to 0.62%, with fresh elections now seen as a potential risk according to traders.
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