2016-01-25bloomberg.com

Ireland is another European electorate jaded by budget cuts. Polls indicate that Prime Minister Enda Kenny's ruling coalition will struggle to win a majority, though there's no clear alternative. The country, European Central Bank President Mario Draghi's model for economic recovery, saw its 10-year bond yields sink below 1 percent this month. But banks and brokers are already sounding warnings.

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Support for Fianna Fail, once one of Europe's most successful parties at the ballot box, is hovering at about 20 percent. Its leadership has so far ruled out governing with Kenny or Sinn Fein, the former political wing of the Irish Republican Army that's turned into an anti-austerity crusader and led the polls as recently as a year ago.

"The general elections in southern Europe in 2015 produced some significant surprises and a muddled political situation," Jens Peter Sorensen, chief analyst at Danske Bank A/S in Copenhagen, said in a note to clients last week. "The upcoming election in Ireland could produce a similar result." It could contribute to "short-lived" volatility in Irish government bonds, he said.



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