Reshuffle and budgetary restraints prey on Fine Gael minds

As the Coalition approaches the mid-point in its five-year mandate, Enda Kenny has signalled that his administration will run its full course until the spring of 2016. The Taoiseach has also declared that he will reshuffle the Cabinet at the "back-half" of its term.

Although nothing will happen before next year, Fine Gael Ministers have expressed diverging views as to whether the move would come before or after the local and European elections next May.

The reality is that the decision has not yet been made and will be dependent on events. Asked yesterday if he had already discussed his plans with Tánaiste Eamon Gilmore, Mr Kenny said this was something he planned to do.

A line of variables are in play, among them the nomination of Ireland's next EU commissioner, the preferences of an ever-tense Labour Party and the response to the October budget.

The clear sense among Kenny's parliamentary lieutenants is he will opt for a very minimalist approach on the Fine Gael side. To name but two senior figures, Minister for Finance Michael Noonan and Minister for Agriculture Simon Coveney are well-entrenched in their respective jobs. However, there could well be movement in portfolios such as transport and environment.

At the same time, Labour’s control of five Cabinet seats means the task is not exclusively in Kenny’s gift.

Assuming the next commissioner is a current Minister, selection for the Brussels seat provides a clear opening to reshuffle the deck. The sense is that this nomination also remains to be pinned down and will have to be done in concert with Labour.

Fine Gael has clear designs on the post, the argument being that it is the major party in the Government and has rock-solid ties with the dominant centre-right European People's Party faction in the European Parliament.

The real power here is with German chancellor Angela Merkel, who seems poised to win a third term in the election next Sunday. The argument is therefore made that Fine Gael would be better placed to secure a decent portfolio. The party has not had a commissioner since Peter Sutherland held the powerful competition commissionership in the 1980s.

Although speculation inevitably centres on Minister for Environment Phil Hogan, he was giving nothing away yesterday. "The Taoiseach will make all these decisions," he said.

An alternative scenario centres on Minister for Education Ruairí Quinn, who casts himself in the European mould but whose nomination would require Fine Gael to cede the post to Labour. Another theory centres on the post going to Mr Gilmore by way of an escape route should his fortunes crash.

Whatever the outcome, EU leaders are not due to select the next president of the Commission until March. That will then set in train the nomination of commissioners by member states.

Common sense favours a swift move on this front, to maximise opportunity in the shake-out for key posts. If that points to a pre-election nomination of the new Irish commissioner and a parallel reshuffle, we are still in the realm of speculation.

In the realm of speculation too is Budget 2014, which is due on October 15th. Despite the clamour from Labour for an appreciable easing of the rate of fiscal retrenchment, there was some satisfaction in the Fine Gael high command that Noonan has laid down an important marker by targeting a primary budget surplus next year.

There may be a modest reduction of the €3.1 billion target for cutbacks and taxes to appease Labour, but Noonan’s push for a primary surplus means he will need considerably more than the €2.5 billion limit set by Gilmore’s party.

Now that the exit from the bailout is imminent, the main message from Fine Gael is that budgetary half-measures would be unwise.

There are three concerns. The first is to minimise borrowing costs from the private market, the idea being that a primary surplus is a key barometer of debt sustainability for investor types.

The second is to ensure the support of the EU-IMF troika for an emergency credit line. The troika opposes any easing of the €3.1 billion target.

Not only that, but it has drawn a direct link between this target and its willingness to finalise a financial safety net. The reality is that this process is on hold pending the German election and the troika’s examination of the final budget package.

The third concern centres on the rate of economic growth – crucial to determining all-important fiscal ratios for budget purposes – and anxiety that figures due tomorrow may disappoint.

Noonan noted in Co Laois that employment numbers suggest the economy is expanding this year.

However, there is no small worry in Government circles that the expiry of pharmaceutical patents – known as the "patent cliff" – is reducing drug exports from Ireland and weighing on economic growth.

There are many moving parts in this panorama. Easter 2016 is an age away.

But as the Dáil resumes today after the long summer recess, Kenny’s action plan is clear enough.