Teetering Irish govt to set out 4-year plan
Ireland's teetering government is set to announce plans to cut welfare spending sharply and raise taxes to help pay for the country's catastrophic banking crisis and meet the terms of an international bailout.business Updated: Nov 24, 2010 21:36 IST
Ireland's teetering government is set to announce plans to cut welfare spending sharply and raise taxes to help pay for the country's catastrophic banking crisis and meet the terms of an international bailout.
The four-year plan to save €15 billion ($20.1 billion) is a condition for an EU/IMF rescue under negotiation for a country long feted as a model of economic development that has become the latest casualty in the euro zone's emergency ward.
Prime Minister Brian Cowen told parliament no final figure had been agreed for financial assistance, "but an amount of the order of €85 billion has been discussed".
The Irish Independent newspaper said the situation was so critical that Dublin could pump extra cash into the ailing banks as early as this weekend, even before the first European and IMF loans are likely to be disbursed.
Cowen said bank recapitalisation details had not been finalised. The government is set to take a majority stake in top lender Bank of Ireland, the only major bank not already under state control, after a crash in banks' share prices this week diluted shareholders' equity.
Ratings agency Standard and Poor's cut Ireland's credit rating to A from AA- and put it on negative watch, sending Irish sovereign bond spreads over safe-haven German Bunds even wider and the cost of insuring Irish debt against default higher.
An erosion of support from coalition partners this week means Cowen is unlikely to survive in office much beyond the New Year to implement the plans. But his successor's hands will be tied by the terms of an agreement to be signed with the EU and the IMF, and Ireland's financial crisis will leave little scope to revise them.
Trade unions, student groups and pensioners plan a major demonstration against austerity in Dublin on Saturday.
The four-year spending plan is the first step before Cowen can lay out his budget for next year on December 7, the fate of which could be in doubt.