15 October 2013

WSJ: Ireland unveils budget running up to exit from bailout programme

Ireland's government has set out its plan for a seventh year of painful austerity in 2014, hoping to convince bond investors of its commitment to cutting its budget deficit as it prepares to survive without bailout loans from the EU and IMF.

Finance Minister Michael Noonan told lawmakers that the budget will introduce as much as €2.5 billion in new tax increases and spending cuts, saying Ireland will better the deficit target for 2014 set under its bailout agreement. The proposed cuts are the smallest since Ireland slid into crisis in 2008.

Under the budget, the deficit is projected to fall to 4.8 per cent of gross domestic product in 2014 from 7.3 per cent this year. The government is committed to reducing its deficit to below 3 per cent of GDP in 2015. The Irish government will be obliged to endure a tight regime of fiscal oversight for many more years to cut its towering national debt.

Despite those constraints, Mr Noonan told lawmakers that in ending its dependence on bailout loans, the nation would regain control over its destiny. "We will have closed this chapter of Ireland's history", he said. "We will have exited the programme and Ireland will have been handed back her purse. Further actions will be required in the years ahead. The recovery is well under way, but there are also many risks. It is time now as a nation to look forward to the future."

Opinion polls suggest that the two-party coalition has lost a third of the 56 per cent of the vote it secured when it swept to power in 2011. It faces its first major electoral tests in local and European elections next year. But Mr Noonan said that the effort has been worthwhile and the economy is healing. "The sacrifices people have made are well known", he said. "The purpose of this budget is to reinforce policies that grow the economy, and to prepare for exiting the bailout programme."

Mr Noonan said the Irish economy would grow by just 0.2 per cent this year, but raised his forecast for growth next year to 2 per cent from 1.8 per cent.

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