By Ryan C. Gavan and Edoardo Zandona
The Irish austerity budget is likely to be Brian Cowen’s last action as Taoiseach , as he is set to call an election early in the New Year.
The budget was set to be announced on December 7th but after mounting political pressure, an announcement will be made this afternoon. The aim will be to set out the plans to reduce the country’s deficit to 3% of GDP by 2014.
This will lead to welfare cuts and tax rises of up to 50% for low paid workers. The minimum wage is set to be cut by 13% and middle class families will lose tax credits.
The Irish government states, “providing assistance to Ireland is warranted to safeguard financial stability in the EU and Euro area.”
Initially, they did not wish to accept the bailout package, feeling confident the problems could be resolved without a handout. After extensive meetings with EU finance ministers it was accepted on Sunday evening.
In a reversal, Cowen rejected calls from junior coalition partners the Greens to hold a snap election.
After discussions with his own parliamentary party last night, Cowen stated he will, ” seek the dissolution of Dail Eireann and enable the people to determine the responsibilities of government in the challenging period ahead.”
He has denied accusations that he is “hanging on” to power.
This could be welcomed by Sinn Feinn, who called for a vote of no confidence in the Taoiseach yesterday. The party has seen increased support in recent times, prompting Gerry Adams to say that he will stand in Louth for election to the Dail.
It has been recently reported that Ireland’s international credit rating has been dropped by Standard and Poor’s from AA- to A. This could have a great impact on the overall economy due to Ireland being highly dependent on oversees investment. The view that they may have difficulty repaying loans could increase interest rates and cause further problems.
Ireland’s debt crisis is the result of the property market crash, starting in 2008. After the huge economic boom, house prices have fallen by up to 60% and the banks have held bad assets ever since.
Aiding to matters is the part-nationalisation of many of the country’s banks, turning into state-held debt.
Irish Finance Minister Brian Lenihan stated “an increase in corporation tax will not be a condition of the bailout.”
Ireland has the lowest level of corporation tax in the Eurozone at 12.5% which has come under scrutiny by other EU member states, such as Germany and France.