Upon appointment, Cowen formed the
28th government of Ireland, a coalition between Fianna Fáil, the Greens and the PDs, which initially had the support of three
independent TDs. His choices of
Mary Coughlan for
Tánaiste and
Brian Lenihan Jnr as
Minister for Finance were criticised as inappropriate by
The Irish Times for their "distressing" lack of experience.
Treaty of Lisbon The Irish electorate's rejection of the ratification of the
Treaty of Lisbon on 12 June 2008, was viewed by some media and political observers as a protest against Cowen and his government. The
Irish Independent called the failed referendum's aftermath the government's "biggest political crisis in decades". Columnist
Brendan O'Connor called the outcome "a humiliating failure for Cowen and the people who put him there". The Taoiseach himself arguably dealt a damaging blow to his own side when, on 12 May 2008, he admitted in a radio interview that he had not read the Treaty of Lisbon in its entirety. The treaty was eventually approved by Irish voters when the successful
Twenty-eighth Amendment of the constitution was approved in the second Lisbon referendum, held in October 2009.
2009 Budget Cowen delivered the Irish government budget for 2009 on 14 October 2008, brought forward from its usual December date due to the
2008 financial crisis. The budget, labelled "the toughest in many years", included several controversial measures, such as a proposed income levy and the withdrawal of previously promised
HPV vaccines for schoolgirls. Other results of the budget included a new income levy being imposed on all workers above a specified threshold and the closure of several military barracks near the border with
Northern Ireland. A public outcry arose over the proposed withdrawal of medical cards and the reinstatement of university fees. A series of demonstrations ensued amongst teachers and farmers, whilst on 22 October 2008, at least 25,000 pensioners and students descended in solidarity on government buildings at
Leinster House,
Kildare Street,
Dublin and outside the
Department of the Taoiseach in
Merrion Street. Some of the pensioners were even seen to cheer on the students as the protests passed each other on the streets of Dublin. Changes to education led to a ministerial meeting with three
Church of Ireland bishops over what was viewed as a disproportionate level of cuts to be suffered by Protestant Secondary schools. Separately representatives of the Roman Catholic Church were assured by O'Keeffe that it would continue to be able to provide religious instruction to pupils in primary schools not under the patronage of the Church. Rebellion within the ranks of the government led to several defections of disenchanted coalition members.
County Wicklow TD
Joe Behan, resigned from the Fianna Fáil party in protests at the proposed medical card changes. He, alongside two other government deputies, later voted against his former colleagues in two crucial Dáil votes on medical cards and cancer vaccines. These defections reduced the Irish government's majority of twelve by one quarter.
Finian McGrath, an Independent
TD, who agreed to support the government after the 2007 election, also withdrew his support from the government. A senior political source said: "The Budget was an accident waiting to happen." Under the
European Union stability and growth pact, EU states are required to keep their budget deficit-to-GDP ratio below a three per cent limit and maintain a
debt-to-GDP ratio below 60 per cent. On 31 October 2008, the
European Commission opened an excessive deficit procedure against the
Government of Ireland, for allowing its budget deficit to exceed the required EU deficit-to-GDP ratio of 3 per cent. The Irish deficit was expected to be 5.5 percent in 2008, and 6.5 percent in 2009. This response forced reversals of proposed changes in several areas, contributing to a perceived weakness in his Government.
2008 Pork crisis On 6 December 2008, the
Food Safety Authority of Ireland ordered the recall, withdrawal and destruction of all Irish pork products dating back to 1 September, due to the discovery of toxic levels of
dioxin in a small percentage of the pig stock. Cowen additionally approved a five-day withdrawal of Irish pork from the market. Within days thousands of jobs were either lost or under threat at pig processing plants across the country, as processors refused to resume slaughter of pigs until they received financial compensation; the crisis ultimately cost taxpayers approximately €180 million. Cowen's government received heavy criticism for overreaction in its handling of the incident, with
Leader of the Opposition Enda Kenny calling the government's response as "an unmitigated disaster".
Anglo Irish Bank The heavy exposure of
Anglo Irish Bank to property lending, with most of its loan book being to builders and property developers, meant that it was badly affected by the downturn in the Irish property market in 2008. On 15 January 2009, after attempting to salvage the Bank by injecting €1.5bn into its coffers, the Government announced that it would take steps that would enable the Bank to be taken into State ownership. The
Anglo Irish Bank Corporation Act, of 2009 provided for the transfer of all the shares of the Bank to the Minister for Finance and was enacted under Irish law on 21 January 2009. On the same date, the Bank was re-registered as a private limited company. Observers at the time commented that the government had been slow to respond to the collapse of the Bank, with
The Sunday Times stating that "Nationalisation was good enough for other European governments, but Brian Cowen's administration avoided the inevitable until its back was to the wall. Too frequently, it is seen to be reacting to events, not controlling them."
2009 Emergency budget In a
second emergency budget, delivered in April 2009, a fiscal deficit of 10.75 percent of gross domestic product (GDP) was addressed. The budget's initiatives included a doubling of the previous year's income levy to 2%, 4% and 6%; increases on the excise duties on a regular packet of cigarettes (25 cents) and a litre of diesel (5 cents); a new "
asset management agency" established to remove bad loans from Irish banks; the gradual elimination of early childcare supplement by 2010, to be replaced by a subsidy towards pre-school for 3- and 4-year-olds; and no further increases in social welfare for at least two years. Cowen defended the emergency measures as necessary.
First no confidence vote National and international press reactions to the budget were largely favourable, with the economics editor of the
BBC reporting that there were lessons for the United Kingdom to learn from this emergency procedure and the
European Commission hailing the budget as a form of "decisive action". However, it did little to revive the political fortunes of Cowen's government. After Fianna Fáil performed badly in the elections of 5 June 2009, losing half its European Parliament seats, Fine Gael tabled a
motion of no confidence against Cowen on 9 June. He survived the vote by a margin of 85–79. Support for the government continued to fall: on 3 September 2009, an
Irish Times/TNS mrbi poll, opinion poll reported that Cowen's satisfaction rating had dropped six points to 15 per cent, with 77 per cent of voters saying they were dissatisfied with the way he was doing his job.
2010 Budget and NAMA controversy Cristina Fernandez in 2010. Cowen's government's third budget within 14 months, delivered on 9 December 2009, saw the government facing the reality of the country nearly becoming insolvent. The 2010 Budget was described by commentators in Ireland and around the world in unusually harsh terms as €4 billion was removed from the country's national deficit;
The Irish Times labelled it "the most austere Budget in the history of the State". It was characterised by pay cuts for
public sector workers and cuts in
social welfare. According to the
BBC, social welfare cuts had not been implemented by the country since 1924. The cuts prompted at least one angry outburst in
Dáil Éireann. In February 2010, Cowen defended his claim that the
National Asset Management Agency (NAMA) would increase the supply of credit into the economy despite the
International Monetary Fund (IMF), saying it would not lead to any significant increase. "People should contemplate what level of credit accessibility we'd have in this economy without NAMA," he said. "It's not just sufficient in itself obviously for credit flow, it's certainly an important and necessary part of restructuring our banking system, of that there's no doubt, in terms of improving as a location for funding of banking operations," said Cowen. He previously said that the Government's objective in restructuring the banks through NAMA was to "generate more access to credit for Irish business at this critical time". In September 2009, the Minister for Finance,
Brian Lenihan, expressed a similar view, saying it would lead to more lending for businesses and households. Cowen was responding to reports published on 8 February, that the IMF had told Brian Lenihan in April 2009, that the NAMA would not lead to a significant increase in lending by the banks. The comments, which appear in internal
Department of Finance documents released under the Freedom of Information Act, were made by senior
IMF official, Steven Seelig, who was to join the board of NAMA in May 2010. Minutes of a private meeting at the department between Brian Lenihan and IMF officials on 29 April 2009, state that the "IMF (Mr. Seelig) do not believe that Nama will result in significant increase in bank lending in Ireland". The Government has maintained that NAMA's purchase of bad loans from the banks with State bonds would increase the flow of credit in the economy since the plan was unveiled in April 2009. Speaking at the publication of the NAMA legislation in September 2009, Mr Lenihan said it would "strengthen and improve" the funding positions of the banks "so that they can lend to viable businesses and households". The IMF estimated in their published report that domestic banks would face losses of up to €35 billion, though the department pointed out this would be partly funded from operating profits and provisions already taken against some loan losses. On 15 June 2010, Cowen faced his second no-confidence motion in just over a year, tabled by Fine Gael after the publication of two reports that criticised government policies in the run-up to Ireland's banking crisis. He again survived the motion, 82–77.
EU and IMF rescue On the evening of 21 November 2010, Cowen confirmed that Ireland had formally requested financial support from the
European Union's
European Financial Stability Facility (EFSF) and the
International Monetary Fund (IMF), after long resisting pressure from other
eurozone nations, particularly
France and
Germany. On 28 November 2010, the
European Commission agreed to an €85 billion rescue deal of which €22.5 billion from the
European Financial Stability Mechanism (EFSM), €22.5 billion from the IMF, €22.5 billion from the
European Financial Stability Facility (EFSF) and bilateral loans from the
United Kingdom,
Denmark and
Sweden. The remaining €17.5 billion will come from a state contribution from the National Pension Reserve Fund (
NPRF) and other domestic cash resources. The bailout was widely seen in Ireland as a national humiliation, and by some as a betrayal of the long-fought struggle for Irish independence whose legacy forms a major part of the Irish identity.
The Irish Times editorialized: On 24 November 2010, Cowen unveiled a four-year plan to stabilise the economy by 2014. The plan was met with great protest as it included deeply unpopular elements, including drastic cuts in social welfare, the lowering of the minimum wage, and an increase in the
value added tax while maintaining the state's low corporate tax rate. In recognition of the political disaster this would inflict on his government, Cowen indicated that the election would take place in early 2011 after the 2011 budgetary process has been completed, though at the time he would not set a specific date. ==Fall from power==