Tuesday, 7 April 2009

ireland needs job,s kleeneze the answer

Ireland slashes growth forecasts, unveils budget
By Andrew Bushe
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DUBLIN (AFP) - Ireland slashed its growth forecasts Tuesday in an austerity budget that included tax hikes and spending cuts as the recession-hit country struggles to cope with ballooning deficits.

Finance Minister Brian Lenihan also unveiled plans for a new agency to take toxic assets off banks' balance sheets in a bid to ensure lenders had a "clean bill of health."

The country now forecasts a decline in Gross Domestic Product (GDP) of 7.7 percent this year, and a contraction of 2.9 percent next year before returning to growth of 2.7 percent in 2011.

It had originally projected GDP to shrink by 6.75 percent this year.

"We are the living witnesses to the most dramatic collapse in the world financial order since 1929," Lenihan told lawmakers in Ireland's lower house of parliament.

"We are a small open economy with a huge exposure to international economic trends. Our confidence, our finances, our exports and our banks have been dented."

Coupled with its ballooning public sector deficit, Ireland's jobless toll has soared to 11 percent, consumer spending has collapsed by a fifth, and its property bubble has burst, with house prices down over 40 percent so far.

Introducing a series of austerity measures amounting to about 3.2 billion euros (4.2 billion dollars) in tax rises or cuts in spending this year, Lenihan warned Ireland's "expenditure base is too high and our revenue base is too low."

Official data has shown that Irish government tax revenues plunged 23 percent in the first quarter of this year, while expenditure was six percent ahead of schedule.

"If we fail, refuse or neglect to address this structural problem, we will condemn our generation and the next to the folly of excessive borrowing," he said.

Kevin McLouglin, head of tax at Ernst & Young Ireland, said the budget would "significantly" affect most people's disposable income.

"While the need to raise revenue is recognised, it will be important that the impact on spending power does not become so significant as to severely limit the role such spending will necessarily play in recovery," he said.

Lenihan also downgraded Ireland's Gross National Product (GNP) projections, predicting a decline of 8.0 percent this year, against its previous estimate of a 6.9 percent contraction.

GNP is regarded by the Irish government as a more accurate barometer of economic performance as it strips out profits earned by multi-national companies in Ireland that are taken out of the country.

The minister said that without the belt-tightening measures announced Tuesday, the public sector deficit would have stood at 12.75 percent of GDP but is now projected to be 10.75 percent of GDP both this year and next.

Lenihan insisted Ireland would still be on track to adhere to eurozone rules on deficits by 2013, which in theory require members to hold their public deficits to 3.0 percent of output.

On toxic assets, Lenihan said they would be transferred to a new National Asset Management Agency "with the purpose of ensuring that banks have a clean bill of health, their balance sheets are strengthened and uncertainty over bad debts is reduced."

He said the "potential maximum book value of loans" to be transferred would be 80-90 billion euros, but the amount paid by the agency would be less to reflect their decline in value.

Ireland is currently investing seven billion euros to recapitalise the country's two biggest lenders, Allied Irish and Bank of Ireland.

On Monday, it emerged that the Irish premier is also to slash the number of junior ministers from 20 to 15. Each draws an annual salary of over 150,000 euros.
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