Deep economic recession dominated FitzGerald's second term as well as his first. Pursuing "fiscal rectitude" to reduce a high national debt required a firmer control of public spending than Labour found easy to accept. The harmonious relationship the Taoiseach developed with his
Tánaiste,
Dick Spring, successfully avoided a collapse of the coalition for more than four years, despite tensions between other Ministers, and enabled the government to survive. Fine Gael wanted to revive the economy by controlling public spending and imposing cutbacks to reduce the public budget deficit. The measures proposed by FitzGerald's Minister for Finance,
Alan Dukes, were utterly unacceptable to the Labour Party, which was under enormous pressure from its support base to maintain public services. The two parties in government found themselves in a stalemate position. They stopped the financial crisis from worsening but could not take the decisive action that would generate economic growth. With negligible economic growth and large-scale unemployment, the FitzGerald government was deeply unpopular with the public. When FitzGerald attended a
Bilderberg meeting in 1985, his rival Haughey suggested it had links with
NATO, thus contravening
Ireland's official position of neutrality.
Constitutional reform As Taoiseach for a second time, FitzGerald advocated a liberalisation of Irish society to create what he called the non-sectarian nation of "
Tone and
Davis". The
Eighth Amendment of the Constitution, which "[acknowledged] the right to life of the unborn", was approved in a referendum against the recommendation of FitzGerald. A
proposal to allow divorce was defeated in a 1986 referendum; however, the
law on contraception was liberalised under the
Health (Family Planning) (Amendment) Act 1985. and was bitterly opposed by Unionists in Northern Ireland, whose MPs all resigned their seats in the
British Parliament in protest. New elections were required to be held in Northern Ireland, in which the unionists lost the seat of
Newry and Armagh to
Seamus Mallon of the SDLP. During this period, on 15 March 1984, he was also invited to address a
joint session of the United States Congress, the fourth Irish leader to do so. His government had also passed the Extradition Act 1987, which ended the long-standing defence against
extradition of suspects who could plead that an act of violence in Northern Ireland or Britain was a political offence. While the agreement was repudiated and condemned by Unionists, it was said to become the basis for developing trust and joint action between the governments, which in time would ultimately bring about the
Downing Street Declaration of 1993 and the subsequent republican and
loyalist cease-fires.
Infighting and declining support FitzGerald attempted to reshuffle his cabinet in February 1986, but certain ministers resisted – notably
Barry Desmond, who refused to move from his Health and Social Welfare portfolio. The eventual outcome of the cabinet changes further undermined FitzGerald's authority. The new
Progressive Democrats party was launched later that year by
Desmond O'Malley out of the divisions within Fianna Fáil. It struck an immediate chord with many disenchanted Fine Gael supporters who had tired of the failure to address the economic crisis fully and who yearned for a coherent right-wing policy from FitzGerald. Seeing their party's support base under attack from the right only strengthened the resolve of FitzGerald's Fine Gael colleagues to break with the Labour Party approach, despite their leader's close empathy with Labour. Stymied by the economic crisis, FitzGerald tried to rescue some of his ambitions to reform the state, and he proposed, in the middle of 1986, a referendum to change the constitution to allow for divorce. The proposed amendment was mired in controversy, and the many accompanying legal changes needed were not presented. Haughey skilfully opposed the referendum along with the Roman Catholic Church and landed interests worried about property rights. In January 1987, the Labour Party members of the government withdrew from the government over disagreements due to budget proposals. Lacking a parliamentary majority, FitzGerald sought a dissolution of the Dáil, which was granted, continuing to lead a minority Fine Gael government until after the election. In the
1987 general election, Fine Gael stood on the proposed stringent budgetary cutbacks that Labour had blocked for four years. Fianna Fáil returned to office in March 1987 after Fine Gael was heavily defeated in the election. The Progressive Democrats won 14 seats, mainly from
Fine Gael. Although Haughey did not have an overall majority, when it came to the
Dáil vote on the nomination of Taoiseach, the Independent left-wing TD
Tony Gregory voted against FitzGerald but abstained on Haughey, seeing Haughey as the "lesser of two evils". This was because of Gregory's opposition to the Anglo-Irish agreement and his strong personal dislike for FitzGerald. Haughey was elected Taoiseach on the casting vote of the
Ceann Comhairle. == Post-Taoiseach period ==