Ireland’s Next Leader Has a Tough Job: Hold Back Sinn Fein

(Bloomberg) -- The sudden exit of Prime Minister Leo Varadkar leaves Ireland at a crossroads. Unaffordable housing, inequality and political pressures linked to immigration give the nationalist Sinn Fein party an opportunity to take power for the first time in 2025, or sooner.

Most Read from Bloomberg

In his emotional announcement in Dublin on Wednesday, Varadkar gave little away as to why he chose this moment to step down. The reasons were “personal and political,” he said, adding he wanted to give his successor the best chance to compete at an election that must be held by March next year.

But after he listed his achievements, such as navigating the fallout from Brexit and the Covid-19 pandemic, a pause before acknowledging areas “in which we have gone backward” spoke volumes. The dominant political theme in Ireland is younger voters being drawn to Sinn Fein’s language on soaring rents and squeezed public services that Varadkar’s Fine Gael and coalition partner Fianna Fail have struggled to counter.

A Sunday Independent/Ireland Thinks poll this month put Sinn Fein at 27%, with Fine Gael at 20% and Fianna Fail at 18%. While that shows a slight drop, it still puts Sinn Fein on track to form the next government, though it would likely need a coalition partner to do so.

That would have potentially seismic implications. Sinn Fein’s core tenet is the reunification of Ireland. It was part of the struggle for independence from the British in what is now the Republic, and in Northern Ireland, it had links with the Irish Republican Army during the sectarian violence known as The Troubles.

It’s just weeks since Sinn Fein’s Michelle O’Neill was appointed Northern Ireland’s First Minister. Party leader Mary Lou McDonald said the historical milestone put united Ireland “within touching distance.”

Still, its success in Ireland’s election will hinge on which issues dominate the campaign, according to Mary Murphy, senior lecturer in politics at University College Cork. “What voters are most concerned with are housing and health and climate change and these kinds of issues, and their judgment will be about whether political parties are able to deliver,” she said.

Whether a leadership change will help Fine Gael “is very hard to measure,” she added, though one thing is certain: Sinn Fein will “try to exploit this upheaval.”

A new prime minister is set to be in place by April 5, with two weeks set aside for a potential leadership contest. The current front runner is government minister Simon Harris, although the race could heat up if Paschal Donohoe, who is also Eurogroup president, puts his hat in the ring.

About 10 Fine Gael politicians have already announced they are stepping down at the election, almost a third of the party’s total in Ireland’s parliament, the Dail. “There was definitely some rumblings within Fine Gael,” Murphy said, though nothing that would indicate Varadkar was about to go as well.

Viewed from afar, the sources of voter discontent are not immediately obvious. With a population of just over 5 million, Ireland is among the richest countries in the world measured on a per capita basis. That is down to the large number of multinational companies including Apple, Meta, Microsoft and Google who have made it their European base.

Warnings that a rise in corporation tax under new OECD rules would lead to an exodus have proved unfounded. Though impacted by global headwinds, the tax windfall was so great that the government set up a sovereign wealth fund.

In many ways, Varadkar was the poster child for this rapid progress. The first out gay man and person of color to lead the country, he has been at the forefront of some of the biggest legal and social changes in decades.

He was health minister when same-sex marriage was legalized via referendum in 2015, coming out publicly ahead of the vote, and his government legalized abortion during his first stint as premier in 2018.

In late 2019, it was Varadkar who persuaded then UK premier Boris Johnson to agree to a Brexit compromise to avoid a hard border between Northern Ireland and the Republic. Johnson had been threatening a no-deal split from the European Union that was politically advantageous for his standing in his Conservative Party, but would have wreaked havoc on the island of Ireland by ending frictionless travel and trade on the island of Ireland.

The government’s response to Covid-19 had its critics, but ultimately the coalition emerged with some credit. Ireland has had relatively stable economic growth, unlike many eurozone nations, with almost full employment.

But a persistent and acute housing crisis and creaking health system has led to frustration, and Varadkar’s administration has faced accusations of being disconnected from the underlying issues facing the electorate.

It’s less than two weeks since the government suffered surprise defeats in two referendums to change outdated language on women and the family, with Varadkar taking much of the flak for misjudging the public mood. In the run up to the vote, the prime minister triggered a backlash online when he appeared to downplay the state’s responsibility for social care.

“Fine Gael has long been puzzled by the ungratefulness of the electorate. All the macro economic indicators are good,” said Gary Murphy, professor of politics at Dublin City University. “They are in significant trouble with the electorate and I don’t think that this is going to be a sort of a salve to that,” he added, referring to Varadkar’s resignation.

As in many Western nations, tensions have risen in Ireland over the strain on public services after the pandemic. While Ireland had appeared to escape right-wing rhetoric seen in other European countries, there has been a rise in far-right activism and finger pointing at immigration.

Protests have broken out where accommodation is allocated to asylum seekers, and the riots in Dublin that took police off guard last year had a strong anti-immigration undertone.

The next electoral test for the country’s politics, and the next Taoiseach, come in June when Ireland holds votes for the European Parliament representatives as well as local councils. Both Fine Gael and Fianna Fail are expected to see a drop in support. But the immediate question is whether the coalition government can withstand opposition pressure for an early national vote.

Deputy Prime Minister Micheal Martin, Fianna Fail’s leader, said he expects the government to complete a “full term.”

For Varadkar, his legacy will depend on what happens next, according to Murphy at Dublin City University. There had been a feeling that he would lead his party “to greater heights, which apparently hasn’t happened.”

(Updates with leadership timing in the ninth paragraph.)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.