Martin Wins Two Years to Beat Ireland’s Greatest Crisis

(Bloomberg) -- Ireland’s new prime minister has just over two years to shape his legacy.

After his election on Saturday, Micheal Martin, 59, will lead the nation’s first grand coalition until the end of 2022 before handing over to Leo Varadkar, in a rotating premiership. In the meantime, Varadkar will serve as jobs minister and deputy prime minister.

The Fianna Fail leader and former history teacher will have to grapple with some of the greatest challenges facing any government since the nation gained independence almost a century ago.

Brexit remains unresolved, with Ireland most at risk should the U.K. exit the bloc without a trade deal, while Martin will also face pressure from his Green Party allies to deliver on its environmental demands. Most significantly, he’ll have to nurture the economy back to life after the coronavirus crisis.

“This is the fastest moving recession ever to hit our country and to overcome it we must act with urgency and ambition,” Martin said after his election in a parliamentary vote in Dublin on Saturday.

Martin’s ascension to power caps a 30-year career as a lawmaker. The slim, fit former health minister has returned Fianna Fail to power, almost a decade after the party oversaw one of history’s worst economic collapses.

Martin was foreign minister in the government that was forced to ask for an international bailout in 2010 after Ireland was locked out of bond markets. Martin took over as party leader months later, and has spent the last decade nursing Fianna Fail, long the nation’s dominant party of government, back to life.

Now, he takes the helm at the time of another huge challenge. The economy may shrink 8% amid the coronavirus crisis, the central bank has said.

Economic Challenge

The country could run a 30 billion-euro deficit ($33.4 billion) this year to pay for coronavirus related costs, and unemployment is set to remain elevated even as the economy prepares to reopen almost fully on Monday.

“It is beyond this “pent-up” demand phase where there remains an element of uncertainty on the potential lasting psychological and financial damage of the lock down,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin.

In some respects, the government will have a familiar look, with Paschal Donohoe remaining as finance minister and Simon Coveney staying as foreign affairs ministry. That will fuel attacks from Sinn Fein, which won the greatest share of votes in February’s inconclusive election.

Both Fianna Fail and Varadkar’s Fine Gael refused to work with Sinn Fein because of its former links to terrorist campaign to end U.K. rule in Northern Ireland and left-wing politics.

“Instead of moving forwards, we will be moving backward,” Pearse Doherty, finance spokesman for Sinn Fein, said in parliament on Saturday. “Change cannot be stopped.”

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