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Tough Irish budget ahead of bailout

business Updated: Dec 05, 2010 20:30 IST

Crisis-hit Ireland, buckling under huge debts, will this week launch its 2011 budget to slash spending and lift taxation, as part of ongoing efforts to secure a huge EU/IMF international rescue package.

Finance Minister Brian Lenihan is due to address the lower house of parliament on Tuesday, and is expected to unveil savings of about 6 billion euros ($8 billion).

A combined fiscal correction of 15 billion euros over the next four years is required for slashing Ireland's public deficit from about 32% of GDP this year — a record high for the eurozone — to below 3.0% by 2015.

The country is eyeing a rescue package of up to 85 billion euros ($113 billion) from the European Union and the International Monetary Fund.

A cloud of uncertainty hovers over the entire process, though. “The rescue package was dependent upon the passing of the budget through parliament,” said Investec economist Philip Shaw.

That is not to say that everything is hunky dory.

Ireland’s governing coalition led by Prime Minister Brian Cowen is nursing a slender parliamentary majority of just two.

Cowen has promised to keep Ireland’s prized low rate of corporation tax.