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Morwenna Coniam

Varadkar to Face Irish Housing Crisis in Second Stint as PM

Leo Varadkar took over as Ireland’s prime minister, or Taoiseach, for a second time on Saturday as part of a coalition deal struck after the 2020 election, with an urgent housing crisis at the top of his agenda. 

The Fine Gael leader was elected by the country’s parliament with 87 votes to 62 and appointed to the role by the president following the resignation of Fianna Fail’s Micheal Martin. He’ll preside over the second half of a parliamentary term shared between the two historic rival parties with support from the Greens. 

Varadkar thanked his predecessor, who becomes foreign minister as well as deputy prime minister, for “putting the country before politics, and for providing reassurance and hope during difficult times.”

Many things have changed since Varadkar, 43, stepped down in June 2020 during the initial height of the Covid-19 pandemic. Some issues, including the ongoing fallout from the UK Brexit vote and pressure on housing, will be more familiar.

“There are a number of pressing challenges that will define the rest of our term in office,” Varadkar told parliament on Saturday afternoon. “The first is housing. We must do whatever it takes it solve this social crisis and reverse the trend of rising homelessness and falling homeownership.”

Inflation, energy and problems in Northern Ireland are also priorities.

Indeed, issues surrounding the Northern Ireland Protocol — the part of the Brexit treaty which Varadkar negotiated in 2019 to keep the region within the European Union’s customs bloc — remain unresolved, though there have been reports of positive progress and talks have recently intensified. It’s expected that Varadkar will speak to UK Prime Minister Rishi Sunak soon. 

“I want to work with all parties in this house and in Northern Ireland, as well as with the British Government and our partners in the European Union, to make progress on the protocol,” Varadkar said on Saturday. He also plans to work to restore the devolved government institutions in the region which are currently suspended. As minister for foreign affairs, Martin will also be “crucial to this work,” he added.

Varadkar, who was deputy prime minister under Martin, returns to the helm as the country grapples with a cost-of-living crisis and high energy bills, exacerbated by Russia’s war on Ukraine. Meanwhile, an influx of refugees has amplified concern about an increasingly acute housing crisis.

Ireland’s shortage of homes has been building up for a decade and with forecasts showing a decline in new construction next year one of the first pieces of legislation will be a planning bill.

The number of private landlords exiting the market doubled in the second quarter from a year earlier, as rising property prices, rent caps and the prospect of higher mortgage payments made it increasingly unattractive to let.

At the start of August, there were just over 700 rental properties available in the whole of Ireland on popular listings website — a fifth of the average from 2015-2019.

Issues such as housing and transport are raised consistently by company executives looking to invest in the country. Investing in infrastructure will be one of the “major priorities,” Varadkar said at an event in Dublin this week.

How the government performs on these key issues over the next two years will be critical for the next general election, due by March 2025. Left-leaning nationalists Sinn Fein have consistently lead recent polls after the 2020 election saw a surge in support for the party.

In other ministerial changes, Michael McGrath moves to the department of finance as Paschal Donohoe swaps with him to become minister for public spending, under a long-standing agreement between their respective parties. Donohoe’s new department is being renamed to include specific reference to delivering on the execution of public capital projects, Varadkar said. 

With Martin moving to the foreign ministry, former incumbent Simon Coveney takes on Varadkar’s previous position in the department of enterprise. Green Party leader Eamon Ryan remains minister for environment, climate, communications and transport.

The limited extent of the changes was expected. “It really is a case of wanting to keep the ship steady,” said Mary Murphy, a senior lecturer in politics at University College Cork. It makes sense that he would want to do that “amid a backdrop of crisis,” she added.

In a recent poll, 48% of respondents said the government was handling the overall running of the country well.

McGrath inherits Ireland’s finances in a position of relative strength with a strong government surplus expected for the year. Even so, growth is expected to slow significantly next year amid high inflation and weaker business and consumer sentiment.

The new government is unlikely to deliver any significant change in economic policy, despite Donohoe and McGrath coming from different parties, according to Goodbody Chief Economist Dermot O’Leary.

“It feels like it’s continuity,” he said. “Because the two ministers have worked so closely over the last number of years in pretty extraordinary times from a fiscal-policy setting point of view — and they’ve come out of it at the other end in arguably the best physical position of any country in Europe — it’s going to be perceived as another safe pair of hands.”

©2022 Bloomberg L.P.

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