Thursday, November 25, 2010

Ireland Unveils Harshest Cuts, Tax Hikes In History

Attention: Looting in Progress
Shawn Pogatchnik
Associated Press

DUBLIN — Ireland unveiled the harshest budget measures in its history Wednesday, a four-year plan to slash deficits by euro15 billion ($20 billion) so it can receive a massive bailout from the European Union and the International Monetary Fund.

The austerity plan axes thousands of state jobs, trims welfare benefits and pensions, and imposes new taxes on property and water. In all, it seeks to cut euro10 billion ($13.3 billion) from spending and raise euro5 billion ($6.7 billion) in extra taxes from 2011 to 2014.

Even Prime Minister Brian Cowen conceded the plan would hurt the living standard of everyone in the nation.

Yet analysts still expressed doubts that the EU-IMF rescue loan, which Cowen said would be about euro85 billion ($115 billion), would be big enough to save Ireland from an eventual default.


And bank shares plummeted for a third straight day on the Irish Stock Exchange, reflecting growing expectations that investors will be wiped out if the government is forced to seize majority control of the country's two dominant banks, Allied Irish and Bank of Ireland.

"The government is completely in denial about the amount of money they'll have to borrow," said Constantin Gurdgiev, a finance lecturer at Trinity College Dublin and an economics adviser to IBM in Europe.

Ireland is still negotiating the terms of the bailout with European Central Bank and IMF experts. The government hopes its tough budgetary medicine will permit the country's 2014 deficit to fall to 3 percent of gross domestic product, the limit for the 16 nations that use the euro currency.

While most eurozone members are exceeding that rule, Ireland's deficit this year is forecast to reach 32 percent of GDP, a modern European record, fueled by exceptional costs from its unfathomable bank-bailout effort.

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