Brussels, 24/11/2010 (Agence Europe) - On Wednesday 24 November, Ireland officially unveiled a four-year structural adjustment programme to reduce its public debt to below the 3% of GDP cut-off point by 2014: “The size of the crisis means that no one will be sheltered from the contribution that has to be made towards national recovery.... Central to all of this is not just the cuts in spending or the increase in taxes but it's about growing the economy, identifying those sectors ... which are proving to be competitive”, explained the Irish prime minister, pointing out that the measures had been decided by Irish politicians alone and had not been forced on them from the outside.
The four-year austerity programme aims to makes savings of €15 billion over four years, slashing public spending by €10 billion and increasing tax receipts by €5 billion. The spending cuts include reduction of the minimum wage by €1 to €7.65; savings in social welfare expenditure of €2.8 billion by 2014; cutting public service staff numbers by 24,750 over 2008 levels to their 2005 levels; reducing the public sector pay bill by about €1.2 billion between 2010 and 2014; a reformed pension scheme for new entrants to the public service and reducing their pay by 10%; reducing non-pay and non-social welfare spending by €3 billion over the period; and increasing the student contribution to the costs of higher education.
No change in company taxation. On the tax front, the Irish government will increase value-added tax from 21% to 22% in 2013 and from 22% to 23% in 2014. A property tax will be introduced for the first time, but Dublin will keep company tax at the competitive rate of 12.5%, seen by many as one of the main ways the country attracts foreign business.
Ireland is forecasting public debt and a public deficit of 95% and 11.7% of GDP respectively in 2010. The planned debt reductions would lead to the public deficit falling to 9.1% in 2011, 7% in 2012, 5.5% in 2013 and 2.8% in 2014. The debt would peak at 102% of GDP in 2013. Growth from 2010 and 2014 is expected to be 2.75% of GDP.
The Irish press reports that a combined EU-IMF aid package is likely to total €85 billion, some of it being used to inject capital into Irish banks, most of which have now been nationalised in effect. “It is clear that in these negotiations what our European partners are telling us is that we need more capital investment in the banks, we need more assets transferred to NAMA, and we need stronger guarantees in our banking system”, commented Irish Finance Minister Brian Lenihan. On Tuesday, Standard & Poor's lowered Ireland's rating by one point. (M.B./transl.fl)