The Irish government detailed the toughest budget on record yesterday, targeting 6 billion euros in spending cuts and tax hikes while warning passage was vital to avert a worsening crisis and free up EU and IMF rescue funds.
In a speech to parliament, Irish Finance Minister Brian Lenihan sketched out austerity measures for 2011, including cuts to child benefit and public sector pensions, but stuck with growth forecasts some economists — and even the European Commission — believe are too optimistic.
Lenihan acknowledged the government had made “mistakes” but said it was time for the country, at the heart of a deep debt crisis shaking the entire 16-nation euro zone, to move forward with “confidence and purpose.”
“The scale of this adjustment is demanding, but it demonstrates the seriousness of our intent,” Lenihan said.
A burst property bubble has transformed Ireland from one of Europe’s brightest stars to a country that has been forced to seek an 85 billion euro bailout from the IMF and the EU to cover its borrowing costs and shore up its banks.
Prime Minister Brian Cowen needs to get his 2011 fiscal plan past parliament to access the first tranche of emergency aid; and despite a razor-thin majority, he is expected to win passage in a series of votes that begin Tuesday night.
The risk premiums that investors demand to hold Irish 10-year bonds instead of German benchmarks fell on Tuesday to their lowest levels in a month, in anticipation the budget will be approved.
Some still opposed to bailout
The bailout, the second in the euro zone after Greece was rescued in May, has stirred outrage in the humbled former “Celtic Tiger” — and opposition parties slammed the government for mismanaging the economy and sacrificing Irish sovereignty.
“This budget is the budget of a puppet government who are doing what they have been told to do by the IMF, the EU Commission and the European Central Bank,” said Michael Noonan, finance spokesman for the center-right Fine Gael party and a possible future finance minister.