Quelle Reuters:
15:46 24Nov10 RTRS-WRAPUP 6-Irish government unveils 4-year austerity plan
* Government confirms 15 bln euro austerity plan
* Plan includes welfare cuts, public sector job reductions
* Irish PM says 85 bln euro rescue package under discussion
* EU says talks progressing, but will take several more days
(Recasts with details of 4-year plan)
By Peter Graff and Steven Slater
DUBLIN, Nov 24 (Reuters) - Ireland's government unveiled a
15 billion euro ($20 billion) four-year austerity plan on
Wednesday that foresees deep spending cuts and tax increases to
help pay for a catastrophic bank crisis and meet the terms of an
EU/IMF rescue.
The plan includes thousands of public sector job cuts,
phased-in increases in Ireland's value-added tax (VAT) rate from
2013 and social welfare savings of 2.8 billion euros by 2014,
but does not touch the country's ultra-low corporate tax rate.
Crucially, it retains economic growth assumptions unveiled
earlier this month which many economists believe are over
optimistic, given the likely effect of the cuts on already
fragile domestic demand. [ID:nLDE6AN0LJ]
"It doesn't seem all that realistic to me," said Stephen
Lewis, chief economist at Monument Securities. "It seems they're
planning very stringent fiscal measures and yet they expect the
economy to grow against that background. That seems highly
unlikely."
The Irish/German 10-year yield spread
briefly widened to the day's peak of 660 basis
points but later pulled back to 652. The euro , which has
fallen sharply in recent days on fears of contagion from Ireland
to other euro zone countries, barely budged.
The plan is a condition for an EU/IMF rescue under
negotiation for a country long feted as a model of economic
development that has become the latest casualty in the 16-nation
common currency bloc's emergency ward.
A Reuters poll on Wednesday showed that 34 out of 50
analysts surveyed believe Portugal will be forced to follow
Ireland and seek a bailout. [ID:nLDE6AN0KK].
If that occurred, fears about Spain would grow and investors
could begin to worry about the future of the currency zone that
was set up over 11 years ago and regarded as a major success in
its first decade of existence.
85 BILLION EUROS
Irish Prime Minister Brian Cowen told parliament no final
figure had been agreed for EU/IMF financial assistance, "but an
amount of the order of 85 billion (euros) has been discussed".
The Irish Independent newspaper said the situation was so
critical that Dublin could pump extra cash into the ailing banks
as early as this weekend, well before the first European and
International Monetary Fund funds are set to arrive.
The European Commission said talks were progressing smoothly
but would take several more days. "Hopefully it can be concluded
around the end of November -- I cannot be more precise than
that," a spokesman told reporters in Brussels.
Once a loan agreement is signed, it has to be approved by
European finance ministers and the IMF board before the first
funds can flow, and disbursements are likely to be linked to
benchmarks such as the adoption of the 2011 budget.
An erosion of support from the government coalition partners
this week means Cowen is unlikely to survive in office much
beyond the New Year to implement the plans.
But his successor's hands will be tied by the terms of an
agreement to be signed with the EU and the IMF, and Ireland's
financial crisis will leave little scope to revise them.
"There has never been such a political shambles in the
history of the State," Irish Times columnist Stephen Collins
wrote. "The coalition crumbling just days before the publication
of a four-year budgetary strategy has added a whole new layer of
uncertainty to an already volatile situation."
Voters in the former "Celtic Tiger" have already endured two
years of steep cuts in government spending, a collapse in house
prices, a record-setting recession and a relentless surge in
unemployment to 14 percent from around 4 percent.
Years of economic growth led to a property bubble and when
it burst the government guaranteed the debt run up by banks,
foisting most of the burden on to taxpayers.
(Additional reporting by Jodie Ginsberg, Lorraine Turner and
Carmel Crimmins in Dublin, William James in London; writing by
Paul Taylor and Noah Barkin, editing by David Stamp)
(Dublin newsroom)
($1=.7466 Euro)
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