Ireland has finally been able to ease back on its austerity programme in its new budget, trying to give hard-pressed voters a break and boost domestic spending as it prepares to exit an international bailout later this year.
Dublin is using savings from a deal on its bank debt to ease planned fiscal restrictions on a population of 4.6 million weary of six years of tax increases, spending cuts, high unemployment and hefty debts following the “Celtic Tiger” boom years.
Having consistently hit targets to rebalance its economy, Ireland is now confident it will be the first of the eurozone states to complete a three-year European Union/International Monetary Fund bail-out programme in December.
Finance minister Michael Noonan said Ireland’s bailout exit was certain because the Irish treasury had already “stockpiled cash” to pay the nation’s bills through all of 2014.
He said by the time the budget measures are passed into law on 1 January, Ireland should have left the bailout programme.
“We will have closed this chapter of Ireland’s history that began for most of us with the governor of the central bank announcing to the Irish public that the country would be forced to turn to the lenders of last resort,” he said.
“There will be no promissory notes, there will be no Anglo-Irish Bank and there will be no bank guarantee.
“We will have exited the programme and Ireland will have been handed back her purse.”
But he warned difficult choices lay in the years ahead.
“We are well along the recovery path and it is time now, as a nation, to begin to look forward,” he said.
Exiting will allow the centre-right-led coalition to show it is regaining economic sovereignty and Brussels to claim its austerity policies are bearing fruit.
“As the economy continues to grow and jobs continue to be created we have a fair wind at our backs to achieve our objectives and restore our sovereignty,” Mr Noonan told parliament yesterday, presenting Ireland’s seventh austerity budget in six years. “One of the primary tasks of this budget is to lay down the conditions for a successful exit from the bailout programme at the end of this year … We are well on course to do this.”
By making smaller cuts, Mr Noonan is going against advice from his own central bank and initial misgivings from the EU and IMF.
But given that Ireland has hit all its targets, it is unlikely to complicate completion of the €85 billion bail-out.
He will make €2.5 billion (£2.1bn) in tax rises and spending cuts next year, down from the €3.1bn originally agreed.
Mr Noonan said Ireland expected to slash its 2014 deficit to 4.8 per cent, much better than the previously agreed EU-IMF target of 5.4 per cent. Aiming for a smaller deficit should help Ireland sell bonds more cheaply.
The cost of bank bailouts forced Ireland to hit an EU-record 34 per cent deficit in 2010. In Luxembourg, EU economic and monetary affairs commissioner Olli Rehn said Ireland’s export-driven economy had proved resilient in the face of relentless austerity. But he said Irish unemployment, which exceeds 13 per cent, remained “much too high.”
Mr Noonan outlined a wide range of tax rises on alcoholic beverages, bank deposits, state pensions and many other goods and services. He said the largely state-owned banks would be required to pay new levies totalling €200 million in 2014.
Ireland’s 1.8 million workers have seen their take-home pay dwindle 20 per cent or more because of previous income tax increases, but Mr Noonan left current rates unchanged yesterday.
Locked in lift
Half of Ireland’s Cabinet – including deputy premier Eamon Gilmore – narrowly missed the budget after they got stuck in a lift. Transport minister Leo Varadkar tweeted just 35 minutes before Finance Minister Michael Noonan took to his feet “Stuck in lift with half the Cabinet on Budget Day. Late for RTE. What are the chances?”