There is pro-business continuity in Irish elections despite voter dissatisfaction

Ireland's election looks set to have secured victory for the incumbent centre-right parties which have dominated the country's politics for nearly a century. This signals continuity for the business community, but belies the overall dissatisfaction with many social issues.

Fianna Fáil, led by Micheál Martin, and Fine Gael, led by Simon Harris, By midday on Monday it seemed possible to form a coalition that falls just wanting a parliamentary majority within the 174-seat Dáil and is widely expected to hunt the support of 1 or two smaller opposition parties to form a government.

A key query shall be who takes on the role of Taoiseach, Ireland's leader, as Harris currently holds that role but Fianna Fáil will develop into the larger party. One possibility is a repeat of the rotating power-sharing agreement the 2 parties previously negotiated in 2020, after they initially joined a coalition.

Friday's vote brought some surprising losses for high-profile names, together with disappointment for former coalition member the Greens, who retained just one among 12 seats, and challenger Sinn Féin, who’re expected to extend the variety of TDs (parliamentarians) from Fine Gael will achieve. , but doesn’t appear to be ready to start out its own coalition negotiations. Fianna Fáil and Fine Gael have ruled out a partnership with the left-wing party.

The result “breaks with the trend of weaker election results for incumbents seen around the world this year,” analysts at investment firm Davy said in a note.

“The only surprise is that there was no surprise. The electorate has said we want the same thing, or at least that is the result of the election,” Laurent Muzellec, dean of Trinity Business School in Dublin, told CNBC by phone.

“However, underlying this is a frustration among a growing proportion of the Irish population that was not captured in this election. It appears that Sinn Féin has not grasped this sense of frustration, as evidenced by the fact that there were few voters.” “When you talk to people you get a different feeling than the result suggests,” continued Muzellec.

Chief among these problems is the country's severe housing crisis, which has led to a rise in homelessness, particularly in the capital Dublin, said Muzellec.

Fianna Fáil and Fine Gael have made some commitments to increase housing supply, but due to the nature of repeated coalition building, it is not known exactly which elements of a manifesto will be implemented in the future, Muzellec noted.

Some of this dissatisfaction may have been expressed in this Leave surveys in which just 27% named Fine Gael's Harris as their preferred leader, compared to 35% for Fianna Fáil's Martin and 34% for Sinn Féin leader Mary Lou McDonald.

Economists have questioned whether the country faces an economic threat from Donald Trump's re-election in the US, as he threatens sweeping universal tariffs and a protectionist “America first” stance.

“Of all euro zone members, Ireland is by far the most vulnerable to a loss of U.S. trade,” economists Andrew Kenningham and Jack Allen-Reynolds of Capital Economics said in a note last month.

According to the research group, US demand accounts for around 1.5% of economic activity within the euro zone and 1.7% in Germany, in comparison with 7% in Ireland. Ireland sends “a disproportionate share of its exports to the USA”.

“The economy could also be affected by US corporate tax cuts if they persuade US-based multinational companies to relocate their operations from Ireland back to the US. However, we remain optimistic about Ireland’s economic prospects given its other strengths,” the economists continued.

The latest election result confirms that there isn’t a significant political movement in Ireland calling for its own protectionist move away from the very open economy, Laurent Muzellec of Trinity Business School told CNBC.

This is an indication that it’s “still a good place to do business, still open to global companies and as business-friendly as it has been in the last 30 or 40 years,” he said.

While the Trump presidency could influence corporations' decisions about where to locate in the longer term, particularly within the pharmaceutical industry where manufacturing facilities are at stake, it is extremely unlikely that there shall be any exodus, Muzellec continued.

“The big companies were originally here for tax reasons, but now they are established with thousands of employees,” he said. “Many of these jobs are in sales and customer service for EMEA [Europe, Middle East and Africa] So you have to stay in Europe. So if they left Ireland, where would they go? The UK is no longer part of the European Union, France is politically unstable – their other options are limited.”