Irish budget bloodbath begins

The
Irish government has begun presenting the toughest budget in the Republic’s
history to parliament.

Finance
Minister Brian Lenihan is planning $8 billion of cost cuts for the 2011 budget.

It
is part of a deal to secure a $113 billion bail-out from the European Union and
International Monetary Fund.

Despite
the Fianna Fail/Green party coalition’s slim majority, the budget is expected
to be passed.

If
the budget is cleared by parliament, it will trigger the first tranche of
bail-out funds from the EU and IMF.

“It
is the government’s strong view that the economy can continue to grow while we
carry out the… National Recovery Plan,” said Mr Lenihan.

Among
the cost-saving measures announced by the minister was a means-tested 4 per
cent cut in current pensions for public sector pensioners.

He
said there would be no cut to the state pension this year, but working-age
payments would be cut by about 4 per cent.

Further
pay cuts for ministers – including the Taoiseach, Brian Cowen – as well as the
Irish President were announced alongside a civil service pay freeze.

He
announced changes to the income tax system – which he labelled “not fit
for purpose” – that would raise additional revenues.

He
said child benefits were to be cut by $13, with an additional $13 cut for
families with a third child.

The
government previously announced cuts under a four-year National Recovery Plan
unveiled two weeks ago.

Dublin
is looking to save about $20 billion over the period as it struggles to balance
the books, with the biggest cuts of the plan coming this year – between
2010/11.

Mr
Cowen’s government only has a majority in the Dail, or lower house of parliament,
thanks the support of two independent MPs.

One
of these MPs, Michael Lowry, has pledged his support for the budget.

“This
budget is going to be harsh. It’s going to be extremely difficult,” Mr
Lowry said.

“People
will be angry,” he said, “but if we are to survive into the future
and if we are to restore our economy, these difficult and harsh decisions have
to be made.”

But
it is not essential that all parts of the budget are cleared on Tuesday.

The
vote will be conducted via four separate ballots, and the budget must be passed
within four months of Mr Lenihan presenting it to parliament.

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