Embattled Irish PM to present austerity plan
Beleaguered Irish Prime Minister Brian Cowen presents a four-year austerity plan Wednesday, a key step towards securing an international bailout for the debt-ridden eurozone country.
The plan will outline 15 billion euros (20 billion dollars) of savings ahead of a budget on December 7. Both stages are crucial to securing rescue loans from the European Union and the International Monetary Fund.
German Chancellor Angela Merkel said her country was prepared to help Ireland but the support of the eurozone’s biggest player was conditional on “making clear what steps a country must take to get back on a path of stabilisation.”
The Irish people, already struggling with previous austerity measures, can expect drastic cuts in the welfare budget and fresh tax rises, with six billion euros alone due to be raised in 2011.
Cowen fought off calls Tuesday to call a snap election, insisting the country’s priority was to pass the budget before calling an election.
His government has been under fire since agreeing to accept an international bailout, reported by state broadcaster RTE late Tuesday to be worth 85 billion euros.
Ireland will be the second country in the 16-nation eurozone to be rescued this year, after Greece.
The loans are intended to shore up Ireland’s struggling economy and banks but also to stem market fears that the crisis will spread to other heavily-indebted euro economies such as Portugal, which faced its biggest ever strike on Wednesday, paralysing the country.
Merkel told the German parliament Wednesday that “the stability of the euro as a whole must be guaranteed” and therefore Berlin would consider Ireland’s appeal for funds “positively”.
But despite the efforts to shore up the single European currency, the euro fell further Wednesday, sinking below 1.33 dollars, after a fall Tuesday sparked by fears over the eurozone and the crisis on the Korean peninsular. In another blow to Ireland, Standard & Poor’s lowered its credit ratings Tuesday.
Strains caused by Ireland showed Wednesday as Spain, a far bigger eurozone economy, learned it must pay substantially more to borrow for 10-year periods.
But Spain deputy finance minister Jose Manuel Campa insisted in an interview with El Pais newspaper that “an abyss separates us from Ireland.”
In Dublin on Tuesday, Cowen brushed off opposition calls for a snap election, saying that passing the four-year plan, the 2011 budget and finalising the bailout was the priority.
“There is no question of the characterisation of clinging to office being my motivation. That is not my motivation,” he told lawmakers in the Dail Tuesday.
He said despite losing support from two independent lawmakers who shore up his coalition, he expected the various budget laws to pass.
“I believe there will be support for this budget,” he said in a sombre debate. “This is a matter of national importance to us all for the country… for the future of everyone.”
Lawmakers are unlikely to vote on the budget until January, meaning that an election could not take place until February or March.
According to the state broadcaster RTE and the Irish Times, Ireland’s struggling banks will use the international bailout to raise capital reserves from eight to 12 percent.
As a result of the capital injection, the state was to take a 99.9 percent stake in the ailing Allied Irish Banks (AIB) and become a majority stakeholder in the Bank of Ireland, which is currently 36 percent state-owned, RTE said.
The banks will also face a new tax, introduced in lieu of raising Ireland’s low rate of corporation tax, reports said.