By Padraic Halpin and Conor Humphries
DUBLIN (Reuters) - Irish Prime Minister Enda Kenny resigned as leader of his Fine Gael party on Wednesday, kicking off a succession contest between two younger ministers who colleagues hope will boost the party ahead of an election due late next year.
Kenny -- who had already announced he would not lead Fine Gael into the election -- said he would remain prime minister during the contest, due to be concluded on June 2, and during subsequent talks with lawmakers backing the government.
Prime minister since 2011 and leader of his party for almost 15 years, Kenny is expected to be replaced by either Social Protection Minister Leo Varadkar, 38, the bookmakers' favourite, or Housing Minister Simon Coveney, 44.
"I would like to stress the huge honour and privilege that it has been for me to lead our party for the past 15 years, in opposition and into government on two successive occasions," Kenny said in a statement. He was due to step down at midnight to become acting party leader until a successor is chosen.
Kenny has overseen Ireland's dramatic turnaround from entering a humiliating three-year state bailout months before he came to power to becoming Europe's fastest-growing economy for the past three years.
But at a parliamentary election last year, Fine Gael suffered a backlash from voters who felt the recovery was passing them by. It lost a quarter of its seats, only returning to power as the senior party in a fragile minority government.
Unsettled colleagues are banking on a new leader reviving their fortunes after falling marginally behind rivals Fianna Fail in most surveys.
Whoever wins will take over as prime minister, subject to a parliamentary vote, at least until the election. Fianna Fail agreed last year to abstain in key votes to let the minority government run until late 2018.
WORK HORSE VS SHOW HORSE
Some local media have dubbed it a contest between "the work horse or show horse". The latter alludes to Varadkar's plain-speaking manner, which supporters say could widen the party's appeal. The former refers to the way Coveney has raised his profile by trying to tackle a severe housing and homelessness crisis.
National broadcaster RTE said last week that of those in the parliamentary party who had confidentially declared their support -- around half -- 23 favoured Varadkar, the son of an Indian immigrant who is Ireland's first openly gay minister. It said 13 backed Coveney.
Varadkar has said he has more support among those yet to declare while Coveney, whose father was a Fine Gael minister during the 1980s and brother is chief executive of foodmaker Greencore (L:GNC), has said the race is "very, very close".
Under party rules, Fine Gael's 73 lawmakers make up 65 percent of the vote with the balance split between councillors and ordinary members.
BREXIT
Both Coveney and Varadkar have served in Kenny's cabinet since 2011 and are unlikely to usher in major policy changes.
The new leader will take over from Kenny at the European Council in its negotiations over neighbour Britain's leaving, tasked with guiding the policy response at home where Ireland's economy is widely considered the most vulnerable in the EU to the fallout.
Kenny, dismissed as a political lightweight before leading his party to its best ever election result in 2011, built up a close rapport with fellow EU leaders alongside Finance Minister Michael Noonan, who a number of Fine Gael lawmakers expect will also stand down following the leadership contest.
"Enda Kenny will be remembered as the Taoiseach (prime minister) of the government that brought the country back from the brink. Did his country much service," Labour Party leader Brendan Howlin, who served with Kenny in coalition until last year, said on Twitter.