EU Commissioner endorses Irish budget frontloading

Tuesday, 9 November 2010 23:40 - - {{hitsCtrl.values.hits}}

DUBLIN, (AFP) - Ireland’s decision to frontload a four-year 15-billion-euro (20.8-billion-dollar) deficit correction in next month’s budget was endorsed Monday by EU economic commissioner Olli Rehn.

At a press conference in Dublin, he said all-party support for the programme of austerity would boost the plan.

“I find it very important for Ireland and for its people in the first place that a broad cross-party consensus could develop on the necessary measures of fiscal consolidation and structural reforms.

“That’s the best way to avoid any further costs for the people and overcome the crisis rather sooner than later,” he said.

Rehn, who held two hours of talks with Ireland’s Finance Minister Brian Lenihan, said it was “essential” the correction plan was frontloaded if Ireland were to bring its deficit down below the eurozone target of three percent of GDP by 2014.

Lenihan has already announced that the December 7 budget will start the adjustment with six billion euros in spending cuts and tax increases aimed at slashing the deficit to between 9.25 and 9.5 percent of GDP next year, down from its current level of 32 percent.

Ireland was the first eurozone member nation to slide into recession in 2008, its economy hit hard by the global financial crisis, a property meltdown and soaring unemployment.

As a result of the property bubble collapse that has so far seen house prices plunge more than 50 percent, the balance sheets of the country’s banks have been blitzed and they will need a bailout that the government estimates will cost 45.7 billion euros.

This year government revenues are expected to be 35 billion euros and expenditure 54 billion euros, leaving a gap to be borrowed of 19 billion euros, or an average 4,200 euros for every man, woman and child in the country.

Rehn said the initial 6 billion euro correction for 2011 was “correct” and that there was “flexibility to take further action if needed” in case the growth scenarios in the government plan are not realised.

The commissioner also stated that Ireland had not requested “the activation of any European financial backstops” and the matter had not been discussed at their talks.

He added Ireland had “formidable strengths” which were too easily forgotten in the debate about the crisis both in Ireland and abroad.

“Ireland is undergoing an important structural adjustment following a period of severe economic imbalances.

“The credit boom and the real estate bubble were unsustainable and the subsequent crash hit both the banking sector and the public finances very hard and hit the Irish people very hard.”On Tuesday Rehn will meet representatives of the Fine Gael, Labour and Sinn Fein opposition parties and he will also have talks with union and employer bodies and the government of the Central Bank.