Bankrupt Ireland readies budget plan as massive bailout looms

[Pastor Dale Morgan]

Perilous Times

Bankrupt Ireland readies budget plan as massive bailout looms

Loic Vennin
November 21, 2010 - 12:09AM

Ireland moved Saturday towards finalising its four-year crisis plan for cutting its budget deficit which could pave the way for a multi-billion euro bailout.

As concerns grow in the continent about European economies feeling the knock-on effects of Ireland's plight, Prime Minister Brian Cowen's cabinet was set to gather in order to put the finishing touches on its austerity plan.

"A cabinet meeting is likely on Sunday, in the afternoon," Cowen's spokesman said.
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The four-year plan is aimed at sorting out Ireland's budget deficit. The government has pumped some 50 billion euros into its stricken banks, pushing its public deficit to 32 percent of output -- more than 10 times the EU limit.

The new austerity drive is looking to save 15 billion euros between now and 2014.

The cabinet is expected to finalise the new budget measures, which should be announced by Tuesday.

Agreeing on the austerity plan could unlock tense negotiations with the European Union, the European Central Bank (ECB) and the International Monetary Fund (IMF) on a bailout for the Irish economy, as the talks entered their third day.

The international mission is subjecting Ireland's books to forensic analysis, looking at the reasons for the collapse of the one-time "Celtic Tiger" economy.

Ireland's public finances were ravaged by costly banking sector rescues, a property market meltdown and the global recession.

The bailout package could be worth between 40 and 100 billion euros.

The bailout money could be used by the Irish government to prop up the republic's banks, whose huge debt levels have triggered fears of a repeat of the Greek crisis.

Ireland's financial sector is still fragile despite the recapitalisation.

The government is determined that any deal will not require compromise on Ireland's long-cherished 12.5-percent rate of corporate tax, believed to be key in attracting foreign investment.

The tax has helped to encourage companies to re-locate to the republic but EU heavyweights such as Germany claim the low tax rate gives Ireland an unfair advantage and are expected to demand the rate be raised as part of any deal.

Germany's Economy Minister Rainer Bruederle said Ireland's economic collapse had not put the eurozone in danger.

"With the euro rescue plan, we have an effective instrument to ensure the stability of the monetary union. Ireland currently has sufficient reserves of liquidity. The situation is being analysed from day to day," Bruederle said in an interview with the weekly Focus magazine to appear Monday.

"One cannot compare the current crisis in Ireland to the one we had in the spring," he said, referring to the Greek crisis.

Bruederle said financial aid to countries in difficulty should be accompanied by reforms.

"It is important for the stability of the euro that the states which don't fulfill the conditions face consequences," he said.

British Foreign Secretary William Hague reckoned it was impossible to say whether the euro currency would collapse.

"I very much hope not. Who knows?" he told BBC radio. Britain is not a member of the eurozone.

He added: "Clearly we want to make sure there is stability in the eurozone and irrespective of the eurozone there is a specific case for assisting Ireland if Ireland asks for that assistance."