Crisis-hit Ireland awaits crucial 2011 budget

DUBLIN (AFP) – Ireland, facing a humiliating bailout, will unveil another harsh budget Tuesday -- on top of some 6.0 billion euros (8.0 billion dollars) of painful tax hikes and spending cuts already flagged to stabilise its crippled public finances.

DUBLIN (AFP) – Ireland, facing a humiliating bailout, will unveil another harsh budget Tuesday -- on top of some 6.0 billion euros (8.0 billion dollars) of painful tax hikes and spending cuts already flagged to stabilise its crippled public finances.

Finance Minister Brian Lenihan will address the Dail, or lower house of parliament, at 1545 GMT, amid intense anxiety on international financial markets over the fast-moving eurozone debt and deficit crisis.

Lenihan's European counterparts are this week holding crucial meetings in Brussels to address the crisis, which has so far sparked multi-billion-euro bailouts for Ireland and Greece, with others possibly waiting in the wings.

Lenihan is not attending the high-powered Eurogroup gathering because of the budget and has sent ministry officials in his place.

Cash-strapped Ireland, ravaged by the global financial crisis and a deep recession, won an 85-billion-euro (113-billion-dollar) rescue deal from the European Union and the International Monetary Fund just over one week ago.

In order to secure the bailout, Lenihan launched a four-year strategy last week to save 15 billion euros by 2014 -- taking some of the sting out of this week's annual budget.

"The budget is usually the most eagerly anticipated event in the fiscal calendar," said economist Dermot O'Leary at Goodbody stockbrokers in Dublin.

"This year though, its thunder has been stolen by the release of last week's four-year plan.

"As a result, we already know the broad parameters of what will be contained in the budget for 2011."

O'Leary said the budget would comprise about 2.1 billion euros in current spending cuts, 1.8 billion euros in capital spending reductions and 1.4 billion in higher taxation. Another 0.7 billion would stem from other one-off elements.

Dublin, savaged by bank rescues, a property market meltdown and recession-hit tax revenues, is eager for EU/IMF funds to help fix its cash crisis, in an embarrassing climbdown for the former Celtic Tiger nation.

The EU/IMF has told Dublin to "rigorously implement the budget for 2011 and the fiscal consolidation measures announced afterwards" in exchange for the bailout.

Lenihan wants to slash Ireland's public deficit from about 32 percent of GDP this year -- a record high for the eurozone -- to below the EU target threshold of 3.0 percent by 2015.

After the budget, lawmakers will hold a series of votes on the measures in the coming weeks, including an initial vote on Tuesday.

However, Ireland's governing Fianna Fail/Green party coalition, led by Prime Minister Brian Cowen, has a slim parliamentary majority after losing a recent by-election.

On Monday, one of two key independent lawmakers Cowen needs for his two-seat majority in parliament pledged to vote for the budget in a move that is expected to ensure it will be passed.

"Our country is in grave economic danger. I feel duty bound to put the country's interests first. Failure to pass a budget would lead to further economic failure," said independent Michael Lowry.

The unpopular Cowen, leader of the Fianna Fail party, has promised to hold a general election in the new year -- as soon as parliament passes his tough budgetary measures.

Last month, the government announced a series of tax rises and cuts to public sector pay, pensions and social welfare in a bid to slash the deficit.

Cowen has vowed to keep Ireland's prized low rate of corporation tax but has pledged to overhaul income and sales levies over the next four years.

His personal and party support has slumped to record lows following the EU-IMF bailout deal, a recent poll showed.

The Red C survey for The Irish Sun newspaper, the first conducted since the bailout was unveiled one week ago, put Cowen's personal rating at just eight percent.

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