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UPDATE 1-Cowen resigns as party leader, remains Irish PM
* Fianna Fail to elect new leader, unusual division of roles
* Opposition party says to table confidence motion in Cowen
* Former foreign minister seen as favourite to replace Cowen
(Adds opposition reaction, analyst comment)
By Padraic Halpin and Carmel Crimmins
DUBLIN, Jan 22 (Reuters) - Ireland's Prime Minister Brian Cowen bowed to pressure from members of Fianna Fail on Saturday and resigned as the party's leader, but said he would continue to serve as premier until a March 11 election.
Cowen's decision to split the role of party leader and prime minister is highly unusual and crowns a week of political drama that had Irish people shaking their heads in anger.
Many blame Cowen for mishandling the economic crisis and allowing a disastrous property bubble to develop during a previous stint as finance minister. The meltdown that ensued forced the country to accept an 85 billion euro ($115 billion) bailout from the EU and IMF late last year. [ID:nLDE70L08Q]
"He should have gone months ago to preserve some kind of dignity for himself and for the office," said Tony Moore, a vegetable delivery man in central Dublin. "Just look at the country's standing abroad, we're a laughing stock."
Under pressure from his party for weeks, Cowen called a vote of confidence in his leadership at the start of the week. He won that but squandered the victory a few days later when an ill-judged attempt to reshuffle his cabinet nearly brought down his administration.
"This is the right thing to do for the party," Cowen said at a hastily arranged address to the media at a Dublin hotel.
"We will manage the situation and people need to be assured of that. The government will discharge its duties properly and appropriately. It doesn't in any way affect government business." [ID:nLDE70H25G]
Enda Kenny, the leader of the main opposition party, Fine Gael, slammed Cowen's move and said he would table a motion of no-confidence in the prime minister on Tuesday unless he called an immediate election. A vote on the motion would likely be held later in the week.
The government already faces a no-confidence motion on Wednesday and analysts said given its fragile majority and disgruntled membership there was no guarantee the administration would make it through the votes.
"All we know is we are going to get an election on or before March 11 but that is about it," said Micheal Marsh, professor of politics at Trinity College Dublin, calling the events of the past week "bizarre".
"If the conditions in which all of this was going on were not so serious it really would be farcical."
The most unpopular premier in recent history due to his handling of the financial crisis, Cowen lost the support of his party after trying to promote people to his cabinet this week in an apparent attempt to shore up their re-election chances.
His junior coalition party, the Greens, said the move was "the final insult" and threatened to pull out of government unless he abandoned the strategy and called a March election.
Cowen's party is set for a record rout in the upcoming poll after agreeing to deep spending cuts and tax hikes as part of the humiliating bailout deal.
Under the terms of the rescue, Ireland has to tackle the worst budget deficit in Europe and Cowen said that by remaining on as premier he would ensure the final piece of legislation underpinning his 2011 austerity budget would be passed.
A contest for leadership of the Fianna Fail party will be held on Wednesday and former foreign minister Micheal Martin said on Saturday that he would put his name forward.
Martin came out publicly against Cowen before the secret party vote on his leadership on Tuesday. When Cowen won the ballot, Martin left the government.
A clutch of Fianna Fail MPs said on Saturday they would support Martin as leader and Irish bookmakers Paddy Power said he was a 1/16 favourite to take over, meaning gamblers would win just one euro if they put down a 16 euro bet.
Other potential contenders are Finance Minister Brian Lenihan and Tourism Minister Mary Hanafin, whose odds have been put at 10/1 and 12/1 respectively.
Whoever wins, it could be a poisoned chalice. Fianna Fail, in power for 20 of the last 23 years, could lose over half its 74 parliamentary seats, according to opinion polls, consigning it to the opposition benches for years.
Trinity's Marsh said there was a risk Fianna Fail could end up as the fourth strongest party in parliament after the vote, behind the hard-left nationalist Sinn Fein party.
Opinion polls suggest a coalition of the centre-right Fine Gael party and the centre-left Labour party will form the next coalition government. [ID:nLDE70K0CI]
(Editing by Noah Barkin)
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