25th Jun 2022

Ireland to annouce harsh budget

  • Brian Cowen has warned that the budget should not be seen as the 'silver bullet' for the country's economic woes (Photo: The Council of the European Union)

The Irish government is Tuesday (7 April) expected to announce the harshest budget in the history of the state to try and get the economy back on track as it continues to suffer from the fallout of the global financial crisis.

The budget is expected to contain €3.5 billion of new taxes and spending cuts, and is aimed at restored international confidence in the battered Irish economy, previously famed in its 'Celtic Tiger' days as a model for others.

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Recent figures suggest unemployment will average 12 percent this year, exports will be down by six percent; GDP will fall by six percent and consumer spending will contract by 4.5 percent.

The country has been particularly hit as the property bubble burst, sending prices spiralling down by 40 percent and exposing a debt-ridden population.

The budget deficit is heading for 13 percent, over four times the limit set by the euro-zone rules. The European Commission has given Dublin until 2013 to get its budget deficit in order and will be closely monitoring the new budget, to be unveiled at 3.45pm local time.

Ahead of the budget announcement, Irish finance minister Brian Lenihan said the government has to "repair the tax base" saying the measures would not be easy but they would be fair.

He told Irish state broadcaster RTE that those who thought public finances could be restored without tax increases were deceiving themselves.

"Two-thirds of our spending is now welfare payments and payments to public servants. If you want an adjustment on the spending side you have to cut pay for public servants or cut rates for social welfare," he said.

"I have not seen many people advising me to do that. Let's get real where the balance has to be struck here. Anyone who suggests that this cannot be done without tax is deceiving themselves."

Mr Lenihan, who has warned that the country faces a "very grave national crisis," is also expected to announce a new asset management agency to buy up property and development loans from the banks' books, said to be around €56 billion.

In addition, to an increase in the levy on workers, the government is also expected to cut back on road and rail projects and increase taxes on alcohol, cigarettes and petrol.

As part of the budget cut, prime minister Brian Cowen has also asked all 20 ministers of state to resign on 21 April. He is then expected to reappoint only 15 of them.

"The coming months and years we will be asking people to take the strain, to make more sacrifices," he said ahead of the budget, with the country already having seen several protests from public sector workers.

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