The economics team at Goodbody Stockbrokers have written on the seismic shift in Irish politics over the weekend, which saw Sinn Fein take 24.5% of first preference votes in the general election, with Fianna Fail on 22.2% and Fine Gael (the current incumbent party in government) on 20.9%.
Whilst both Fianna Fail and Fianna Gael have previously indicated neither will go into government with Sinn Fein, the political breakthrough by Sinn Fein will likely see a reappraisal and a period of protracted political uncertainty that could see the government in any coalition including Sinn Fein taking a swing to “the left”.
Goodbody say a coalition, like any good marriage, is a compromise, so some of the more extreme anti-bank rhetoric in Sinn Fein’s manifesto is unlikely to see the light of day.
However, the policies likely to be most in focus in the days ahead include end the corporation tax break for banks (so end the tax break from DTAs, which it costed at €175m p.a. in its manifesto): increase the bank levy from €150m to €200m; and give the Central Bank powers to cap mortgage rates and instruct the banks to lower rates.
It is worth noting though that if Sinn Fein ends up in government with Fianna Fail, the latter’s election manifesto also called for an end to the discrimination on mortgage rates between new and existing customers and a review of the role of cashback offers and ensure lenders compete solely on rates.
According to Goodbody, "There are positives for the banks in that housing is likely to take centre-stage in any new government, so a higher volume of delivery could see stronger mortgage lending in time, but this is unlikely to be a focal point for the moment and the general shift to the left and likely tax increases on high earners is an offset, as is any uncertainty SF may pose for planning delivery."