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Ireland unveils 15-bln-euro austerity plan to secure bailout

In Uncategorized on November 25, 2010 at 5:20 am

DUBLIN, Nov 25, 2010 (AFP) – Ireland unveiled a 15-billion-euro austerity package Wednesday required to unlock an international bailout, slashing public sector pay and pensions but refusing to raise corporation tax.


With the eyes of Europe on his debt-ridden nation, Prime Minister Brian Cowen said his four-year package of cuts and tax increases would restore shattered confidence, calling it a signpost on the road to recovery.

A women looks at works of art for sale from the Bank of Ireland auction in the Shelbourne Hotel in Dublin, on November 24, 2010. AFP

“We can and we will pull through this as we have in the past,” Cowen told a news conference.


“We are a smart, resilient, proud people and we are going to come through this challenge because we love our country.”


The 20-billion-dollar plan, to be followed by a budget on December 7, is an essential step towards Ireland receiving a bailout of up to 85 billion euros (114 billion dollars) from the European Union and the International Monetary Fund.


The aim is to slash the public deficit to below three percent of gross domestic product, in line with EU rules, after it ballooned to 32 percent of GDP this year.


Among the key points of the package, sales tax will be raised to 23 percent from 21 percent by 2014, but the 12.5-percent corporation tax rate — a key attraction for foreign companies to invest in Ireland — will be maintained.


The government said it expected unemployment to be brought below 10 percent by 2014, from its current level of over 13 percent.


The minimum wage will be cut by one euro to 7.65 euros an hour, but the government said it would still be one of the highest rates in the EU.


The EU’s economic commissioner Olli Rehn said the package was “a sound basis for the negotiations” on the international bailout.


As Ireland strove to prove it was trying to get its house in order, another heavily-indebted eurozone country, Portugal, was paralysed by a general strike on Wednesday called to protest against deep spending cuts.


The EU fears Portugal will be the next eurozone nation to require a bailout after Greece and Ireland.


Chancellor Angela Merkel said Germany was prepared to help Ireland, but its support was conditional on Dublin “making clear what steps (it) must take to get back on a path of stabilisation”.


Cowen meanwhile fought off calls from the opposition Tuesday to call a snap election, insisting the budget must be passed first.


Irish lawmakers are unlikely to vote on the budget until January, meaning that an election could not take place until February or March.


The EU has told the main Fine Gael opposition party that while the plan’s fiscal targets are non-negotiable it will re-negotiate specific details with an incoming government, finance spokesman Michael Noonan said.


Noonan insisted the plan was “disappointing in its poverty of ambition and detail.”


Experts warned that the plan would not immediately ease Ireland’s problems.


“Uncertainty caused by the collapse of the government… will continue to hang over Ireland in the coming weeks,” National Irish Bank economist, Ronnie O’Toole, said.


IHS Global Insight economist Sonia Pangusion predicted “the downtrend in consumer confidence will accelerate,” adding that the plan for an export-based recovery “increases Ireland’s economic risk.”


The government has been under pressure since caving in and agreeing to accept the bailout on Sunday night.


Despite reports that it is worth 85 billion euros, Cowen told parliament earlier Wednesday the amount had still to be decided as negotiations were ongoing.


The international loans to Dublin are in part intended to shore up banks left with huge debts from the collapse of an overheated property market.


But the bailout is also designed to stem fears of contagion in other eurozone nations such as Portugal and even the far larger Spanish economy, which came under pressure on the markets.


Spain’s deputy finance minister Jose Manuel Campa insisted that “an abyss separates us from Ireland”.


Despite the efforts to shore up the single European currency, the euro fell slightly below 1.34 Wednesday after sinking below 1.33 dollars earlier because of fears over the eurozone and the Korean crisis. 

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Source: SGGP

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