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Published: Friday July 11, 2014 MYT 9:56:04 PM
Updated: Friday July 11, 2014 MYT 9:56:04 PM

Ireland's Kenny retains finance, spending ministers in reshuffle

DUBLIN (Reuters) - Ireland's Prime Minister Enda Kenny retained his finance and public spending ministers on Friday, limiting any disruption to Dublin's deficit-cutting plans from a cabinet reshuffle that followed bruising mid-term elections.

A backlash at local and European elections over austerity cuts cost Deputy Prime Minister Eamon Gilmore his job as leader of the junior coalition Labour Party in May and led to more changes on Friday as Kenny tries to revive the parties' fortunes.

As expected, the cull did not extend to Finance Minister Michael Noonan and Spending Minister Brendan Howlin who have helped regain investor confidence after a crushing financial crisis and put the country's finances back on track.

"In these very difficult years for our country we haven't got everything right. In the circumstances, I believe no government could," Kenny told parliament, adding that a new statement of priorities would be published shortly. "Many more people are not yet experiencing the upturn. The new ministers will make sure that the recovery, for which people sacrificed so much, reaches every family in Ireland."

While the Fine Gael/Labour coalition guided Ireland out of an international bailout last year and is seeing increasing signs of economic recovery, the benefits are not being felt by many voters, particularly those in Labour's core support base.

The centre-left party, which elected Joan Burton as its new leader last week, replaced three of its five ministers in the reshuffle, keeping Burton and Howlin.

Kenny, whose centre-right Fine Gael party slumped to second place in the local polls, changed two of his ministers in the 15-member cabinet. One of the vacancies resulted from the nomination of environment minister Phil Hogan to become an EU commissioner.

A number of portfolios also changed hands among current members of the cabinet.

Kenny needs the support of Labour to push through a final package of tax hikes and spending cuts to bring an end to eight years of austerity in October's budget and Burton has pledged to stick to EU-imposed deficit reduction targets.

However she has consistently said that austerity has reached its limits and while positive recent data means - according to Howlin this week - that the cuts won't be anything like the 2 billion euros envisaged, risks remain over the coming months.

"While Ireland has regained the trust of the markets, the issue of credibility of government policy nonetheless remains important and the retention of these two key ministers prevents any diminution of that confidence," said Eoin Fahy, chief economist at Kleinwort Benson.

    "But I wouldn't be entirely sanguine until a little time passes because reshuffles have a tendency to be mishandled. These are two big boxes ticked but disaffected backbenchers or people who weren't promoted could start making the usual rumblings that occur when their party is unpopular."

(Editing by Andrew Heavens)

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