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Voters want Irish PM to quit as economy worsens

DUBLIN, Oct 1 (Reuters) - A majority of voters want Irish Prime Minister Brian Cowen to step down from his post before the next general election, a poll showed on Friday, and new data showed the country’s brief economic upturn weakening further.

Cowen and Finance Minister Brian Lenihan disclosed on Thursday that Ireland faces a bill of up to 50 billion euros ($68 billion) to clean up its banks, revealing the country faces tougher than expected further austerity drives as a result. [ID:nLDE68T04M]

Ireland officially exited two years of recession in the first quarter before shrinking again in the following three months. The third quarter did not look much better after manufacturing activity shrank for the first time in seven months in September.

The NCB Purchasing Managers’ Index, which measures the Irish manufacturing sector, fell sharply to 48.4 from 51.1 in August, dipping below the 50 mark separating growth from contraction for the first time since February. [ID:nSLAUKE6EB]

The government has insisted the overall trend was still pointing to economic stabilisation after an unprecedented plunge in 2009 but investors worry slower-than-expected recovery will threaten plans to cut Europe’s biggest budget deficit.

Only a growing economy will generate the tax revenues needed, alongside spending cuts and tax hikes, to reduce a debt mountain that will swell to 99 percent of GDP this year from 25 percent prior to the crisis, as a result of Thursday’s bank bailouts.

The government’s budget deficit will blow out to 32 percent of Ireland’s economic output this year, more than 10 times EU’s 3 percent cap and by far the worst in the union.

Voters have long lost faith in Cowen and the Irish Times/Ipsos MRBI poll showed 61 percent of them think he should resign before the next general election, due in 2012 but likely to be held before then.

The poll showed 29 percent thought he should remain in place and 10 percent had no opinion.

Cowen may only have a few months left to cede to their demands with his wafer-thin majority in parliament almost certain to be wiped out once by-elections are held to fill three lower-house seats in the first four months of next year.

If Cowen was to stand down as leader of Fianna Fail and Prime Minister, 39 percent of those polled would like to see right-hand man Lenihan take over with Foreign Minister Micheal Martin a distant third, backed by 18 percent of voters.

Some from Cowen’s own party have also called for him to step down, particularly after he embarrassed them last month by conducting a radio interview the morning after partying late with colleagues. [ID:nLDE68D0JY]

However, no senior minister seems set yet to mount a challenge and most analysts see both Cowen and the government lasting until December’s budget when they will have to push through over 3 billion euros of new cuts.

Fears Ireland will follow Greece by turning to its European Union partners and the IMF for help abated after the government cancelled all bond auctions for the rest of the year, highlighting the fact that a growing but well-structured debt portfolio means there is no impending liquidity crisis.

International Monetary Fund chief Dominique Strauss-Kahn does not expect the euro rescue fund to be activated due to Ireland, he was quoted as saying in a German newspaper on Friday. [ID:nBAT005695]

For scenarios for what could trigger the government’s fall [ID:nLDE68Q16P] Reporting by Padraic Halpin, editing by Mike Peacock