Irish PM Enda Kenny calls election as economy takes centre stage

Irish Prime Minister Enda Kenny set parliamentary elections for February 26 on Wednesday, kicking off campaigning for what promises to be a tight contest dominated by a fractious debate over the country's strong economic recovery.

Kenny's conservative Fine Gael party is ahead in the polls but short of a majority, even with the support of current junior coalition partner Labour. If they fail to close that gap, a less stable outcome beckons, with a minority government, a larger coalition including independent deputies or fresh elections all possible.

Announcing a ballot he hopes will make him his party's first two-time prime minister, Kenny appealed to voters to give his government the credit for the turnaround it has overseen. "Five years ago Ireland's economy was close to collapse. (Now) our public finances are back on track, our economy is growing again... and there is no more bailout," he said in a video on Twitter. "This election is about who will keep this recovery going."

I am seeking a dissolution of Dáil Éireann today with the election to be held on February 26th.https://t.co/R5JnwC3XFB

— Enda Kenny (@EndaKennyTD) February 3, 2016

Ireland exited its international bailout mid-way through Kenny's five-year term, when a quicker and stronger recovery than elsewhere in Europe took hold. But while many voters have benefited, others are still feeling the effects of the 2008 financial crisis and a brutal seven-year austerity programme - a disparity the opposition was quick to highlight on Wednesday.

"This is a choice between whether you want a society that is fair and equal or more of the same," Gerry Adams, president of the leftist Sinn Fein party told reporters. ".. It's not about an economic recovery, it's about a social recovery."

GROWTH OUTLOOK UNDIMMED

Having grown around 7% in 2015, Ireland's economy is forecast to be Europe's best performer for the third year running in 2016. An inconclusive outcome similar to recent national elections in Spain and Portugal is unlikely to derail that surge, given Ireland is more vulnerable to external than to internal shocks.

But investors have turned more cautious on the country's sovereign debt, aware that a protracted political stalemate could hamper the flotation of state-owned Allied Irish Banks , one of Europe's biggest in the sector since the financial crisis. It might also impede Ireland's ability to respond quickly to any 'no' vote in an EU membership referendum in neighbour and major trade partner Britain that could happen as soon as June.

Polls show Fine Gael with around 30% of votes and Labour at or below 10%, leaving them more than 10 seats short of a parliamentary majority of 80 and with no obvious alternative coalition in view. Sinn Fein and centre-left Fianna Fail are battling it out for second place just below 20% each.

"It is difficult to see any government that does not include Fine Gael - so the status quo in terms of economic and financial policy should be maintained," Davy Stockbrokers said in a note to clients. "Fears of a more radical (Greek) Syriza-style (leftist) government... are not plausible."