Ireland unveils 6.0-billion-euro savings in annual budget

by Andrew Bushe Andrew Bushe – 1 hr 53 mins ago

DUBLIN (AFP) – Ireland on Tuesday announced an annual budget that comprised 6.0 billion euros (8.0 billion dollars) in savings via tax hikes and spending cuts that are necessary to secure an EU-IMF bailout.

Finance Minister Brian Lenihan, delivering his 2011 budget to the Dail, or lower house of parliament, said he would make the savings as part of a four-year plan to slash a huge deficit by a total of 15 billion euros.

"As outlined in the plan, six billion euros of the overall adjustment is made in today's budget. The scale of this adjustment is demanding but it demonstrates the seriousness of our intent," Lenihan told lawmakers.

Ireland's budget comes at a critical time for the former Celtic Tiger nation, whose 85-billion-euro bailout was formally adopted by EU finance ministers on Tuesday.

Financial markets are on edge over the eurozone debt and deficit crisis, which has also sparked an international bailout for Greece.

Ireland's governing Fianna Fail/Green party coalition, led by Prime Minister Brian Cowen, is clinging to power amid public anger over the eurozone nations' debt crisis.

"This has been a traumatic and worrying time for the citizens of our country," Lenihan said on Tuesday.

"They are concerned that we have to seek external support to help us with our economic and financial difficulties. They are worried about the impact of this momentous and difficult decision on their lives."

The nation's cash-strapped coalition government only recently applied for the enormous bailout loan from the European Union and the International Monetary Fund.

Lenihan on Tuesday said Ireland urgently needed the EU-IMF cash to break out of a "vicious cycle" whereby international investors were rapidly losing confidence in the government's ability to control the public finances.

The Irish government wants to slash the country's public deficit from about 32 percent of GDP this year, to below the EU target threshold of 3.0 percent by 2015.

Lenihan said the cuts announced Tuesday would reduce the deficit to 9.4 percent of GDP in 2011.

At the same time, he predicted that the Irish economy was set for modest growth this year of 0.3 percent after a deep recession.

"If the real economy is poised to grow, why do we need the help of the IMF and the EU?" said Lenihan.

"The answer is: we need their support to break the vicious cycle that has threatened our national finances and our banking system since the second quarter of this year."

The 2011 budget contains two billion euros of tax increases and four billion euros of expenditure cuts. The government unveiled measures such as cuts to ministers' salaries and child benefit, alongside increases to taxes on income and fuel.

But Cowen has vowed to keep Ireland's prized low rate of corporation tax, which stands at 12.5 percent.

The first of a series of votes on taxation measures was passed late Tuesday by 82 votes to 77 in the Dail, which included motions involving increases in petrol and diesel.

It was just one of many votes needed to pass the budget, and the process is not expected to be wrapped up until early next year.

Lenihan added that the 2011 budget represented a major "down-payment" to help secure the nation's recovery.

"We have been through a tumultuous two years culminating in our application for external assistance. Today's budget is our first step in ensuring that we can get back firmly on our own feet.

"It is a substantial down-payment on the journey back to economic health. We can emerge from this dark time as a stronger and fitter economy to provide sustainable jobs and decent public services for all our citizens," he said.

Dublin, savaged by bank rescues, a property market meltdown and recession-hit tax revenues, is eager for EU-IMF funds to help fix its cash crisis, in an embarrassing climbdown for the small nation.

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