Dublin: Irish Prime Minister Brian Cowen said on Friday he would dissolve Parliament next Tuesday and announce the date of a general election -- in which the ruling Fianna Fail party is expected to suffer a heavy defeat.
Cowen`s announcement will mark the end of his tumultuous time as premier, during which he was criticised for mishandling a financial crisis that sent shockwaves across the euro zone and forced the former "Celtic Tiger" economy to seek a bailout.
Cowen had promised to dissolve Parliament once the finance bill, the last piece of legislation underpinning the 2011 budget, had passed both houses of Parliament, paving the way for an election probably on February 25.
The lower house passed the finance bill on Thursday and it has now moved to the Senate, or upper house, for approval.
"The Dail (lower house) is due to resume on Tuesday next and I have indicated that I believe that that is the appropriate forum for me to advise the Dail that I will seek the dissolution of the house by going to the president on that day," Cowen told national broadcaster RTE.
The bill`s passage means Ireland will meet its goal, under the EUR 85 billion (USD 116 billion) EU/IMF deal agreed late last year, of delivering a record austerity budget by the end of March targeting EUR 6 billion in spending cuts and tax rises.
This will incense voters, who already have years of austerity under their belts after a property bubble and reckless lending by the banking sector left the country with a massive debt and one of the biggest budget deficits in Europe.
The new government is likely to be a coalition between the centre-right Fine Gael party and centre-left Labour, which will have to abide by fiscal commitments given to the EU and IMF, as well as impose austerity budgets for the next few years.
Opinion polls suggest Fianna Fail, which elected former foreign minister Micheal Martin party leader earlier this week to replace Cowen, could lose at least half its seats in the election.
In an interview, Central Bank Governor Patrick Honohan said he did not expect a change of administration to affect Ireland`s commitment to its targets, given that all the major parties have agreed to the overall commitments.
Enda Kenny, Fine Gael`s leader and likely future prime minister, met European Commission President Jose Manuel Barroso in Brussels on Friday to discuss what he has described as the "penal" interest rate on the bailout.
After the meeting, Michael Noonan, who is likely to become finance minister in a new Irish government, said: "It`s manageable now but if the interest rate were to come down it would increase our potential for growth."
"European policy on these matters is changing quite rapidly," he said, adding that he would consider writing public borrowing limits into Irish law.
Commenting on possible losses for bondholders in Irish banks, he said it was not his intention to "burn out anybody”.
Two euro zone sources said on Friday that EU officials are considering extending euro zone bailout loans to Ireland to 30 years from seven. Maturities for EU bailout funds to Greece might also be extended in the hope of drawing a line under the bloc`s debt crisis, they said at the World Economic Forum in Switzerland.
Investors remain sceptical about Ireland`s ability to service its debt because of its low economic growth rate, even when a more stable government is in place after the election and with the tough budget taking effect.