Irish Unveil Austerity Budget, Seek Bailout Exit
October 15, 2013 (Associated Press) DUBLIN - Ireland unveiled its seventh straight austerity budget Tuesday, a plan to slash 2.5 billion euros ($3.4 billion) from next year's deficit and pave the way for the nation to escape from its international bailout.
Finance Minister Michael Noonan told lawmakers he was confident that Ireland can resume normal borrowing on bond markets at affordable rates by December, when the country's bailout funds run out.
Noonan said Ireland's bailout escape was certain because the Irish treasury had already "stockpiled cash" to pay the nation's bills through 2014.
The move comes three years after Ireland was forced by the crippling cost of bank rescues to seek emergency loans from the European Union and International Monetary Fund.
Ireland has been raising taxes and slashing spending since 2008, when a Celtic Tiger boom fueled by cheap eurozone credit ended, bringing six domestic banks to the brink of failure. Ireland was forced in 2010 to abandon the bond markets when its own borrowing costs soared.
Noonan said Ireland expected to slash its 2014 deficit to 4.8 percent, much better than the previously agreed EU-IMF target of 5.4 percent. Aiming for a smaller deficit should help Ireland sell bonds more cheaply.
The cost of bank bailouts forced Ireland to hit an EU-record 34 percent deficit in 2010.
Noonan, whose government was formed in 2011, noted that Ireland had consistently beaten its deficit-reduction targets since then.
He said Ireland's debt-to-GDP ratio would peak at the end of this year at 124 percent, then decline next year to 118.4 percent. Such calculations are dependent on forecasts that Ireland continues to post modest growth.
In Luxembourg, EU Economic and Monetary Affairs Commissioner Olli Rehn said Ireland's export-driven economy had proved resilient in the face of relentless austerity. But he said Irish unemployment, which exceeds 13 percent, remained "much too high."
Noonan outlined a wide range of tax hikes on alcoholic beverages, bank deposits, state pensions and many other goods and services. He said the largely state-owned banks would be required to pay new levies totaling 200 million euros ($270 million) in 2014.
Ireland's 1.8 million workers have grown used to annual hits on their net pay and their standard of living. Many have seen their take-home pay dwindle 20 percent or more because of previous years' income tax hikes, but Noonan left current rates unchanged Tuesday.
He also left Ireland's 23 percent sales tax unchanged and imposed no tax hikes on fuel.