By: Dr. Mike Campbell
The Irish government has outlined the austerity plans that it hopes will bring the nation’s deficit back under control by 2014. The Irish crisis has been triggered by a meltdown in the property market which has seen as much as 60% lopped off the value of properties.
It has left many development projects dead in the water and saddled the banks with a vast amount of bad debt from loans made under better, more optimistic times. The government had no option but to step in to save the banks and that, largely, is where the sovereign debt crisis stems from (like most western nations, Ireland had also been living beyond its means, but it is the banking crisis that has put the camel in traction in the local high dependency ward).
The Irish hope to save €15 billion from the budget over the next four years to fill the hole left by the financial crisis. In the measures outlined yesterday, this will be achieved, they hope, by a raft of measures which will see a €1 cut in the minimum wage; thousands of public sector jobs will be axed; social welfare spending will be cut; a new property tax will be levied; VAT will be increased; and income taxation will rise.
This is the second set of austerity measures that the Irish have imposed, coming hard on the heels of a further €15 billion cut that has been made over the last two years. Most analysts believe that the budget will be passed, but that the ruling coalition will call (and lose) a general election early in the New Year. Negotiations with the EU for a bailout of up to €90 billion should be completed by year’s end.