DUBLIN – Ireland unveiled its seventh straight austerity budget Tuesday, a plan to slash 2.5 billion euros ($3.4 billion) from next year’s deficit and pave the way for the nation to escape from its international bailout.
Finance Minister Michael Noonan told lawmakers he was confident that Ireland can resume normal borrowing on bond markets at affordable rates by December, when the country’s bailout funds run out.
Noonan said Ireland’s bailout escape was certain because the Irish treasury had already “stockpiled” about 25 billion euros ($34 billion) to ensure that the nation’s bills can be paid through 2014.
The move comes three years after Ireland was forced by the crippling cost of bank rescues to seek 67.5 billion euros in emergency loans from the European Union and International Monetary Fund.
Police deployed heavily outside Leinster House, the parliamentary building, and key streets in central Dublin to ensure that hundreds of anti-austerity protesters did not try to block the roads.
Ireland has been raising taxes and slashing spending since 2008, when a Celtic Tiger boom fueled by cheap eurozone credit ended, bringing six domestic banks to the brink of failure. Ireland was forced in 2010 to abandon the bond markets when its own borrowing costs soared.
Noonan said Ireland expected to slash its 2014 deficit to 4.8 per cent, much better than the previously agreed EU-IMF target of 5.4 per cent. Aiming for a smaller deficit should help Ireland sell bonds more cheaply.
The cost of bank bailouts forced Ireland to hit an EU-record 34 per cent deficit in 2010.
Noonan, whose government was formed in 2011, noted that Ireland had consistently beaten its deficit-reduction targets since then.
He said Ireland’s debt-to-GDP ratio would peak at the end of this year at 124 per cent, then decline next year to 118.4 per cent. Such calculations are dependent on forecasts that Ireland continues to post modest growth.
In Luxembourg, EU Economic and Monetary Affairs Commissioner Olli Rehn said Ireland’s export-driven economy had proved resilient in the face of relentless austerity. But he said Irish unemployment, which exceeds 13 per cent, remained “much too high.”
Noonan outlined a wide range of tax hikes, including on tobacco products, beer and wine. He said the largely state-owned banks would be required to pay new levies totalling 150 million euros ($200 million) in 2014.
The government raised charges for drug prescriptions, cut maternity pay and restricted access to state-covered medical care. It also reduced unemployment payments for people aged 22 to 24 to 100 euros ($135) a week from 144 euros ($194).
Ireland’s 1.8 million workers have grown used to annual hits on their standard of living. Many have seen their take-home pay dwindle 20 per cent or more because of income tax hikes, but Noonan left current rates unchanged Tuesday.
Other headline taxes rates went untouched: The 23 per cent sales tax on most goods and services, a 9 per cent sales tax on tourist activities such as hotels and restaurants, and a 12.5 per cent tax on corporate profits, the centerpiece of Ireland’s strategy to retain more than 1,000 foreign multinationals as employers.
With an eye toward a possible re-election in 2016, the government unveiled a new plan to introduce free doctor’s appointments for children under age 5 and lifted a freeze on recruiting teachers and police.