Debt-ridden Ireland unveils €15 billion austerity package

Ireland unveiled a €15-billion austerity package yesterday required to unlock an international bailout, slashing public sector pay and pensions but refusing to raise corporation tax.

With the eyes of Europe on his debt-ridden nation, Prime Minister Brian Cowen said his four-year package of cuts and tax increases would restore shattered confidence, calling it a signpost on the road to recovery.

“We can and we will pull through this as we have in the past,” Mr Cowen told a news conference.

“We are a smart, resilient, proud people and we are going to come through this challenge because we love our country.”

The $20-billion plan, to be followed by a budget on December 7, is an essential step towards Ireland receiving a bailout of up to €85 billion from the European Union and the International Monetary Fund.

The aim is to slash the public deficit to below three per cent of gross domestic product, in line with EU rules, after it ballooned to 32 per cent of GDP this year.

Among the key points of the package, sales tax will be raised to 23 per cent from 21 per cent by 2014, but the 12.5-per cent corporation tax rate – a key attraction for foreign companies to invest in Ireland – will be maintained.

The government said it expected unemployment to be brought below 10 per cent by 2014, from its current level of over 13 per cent.

The minimum wage will be cut by one euro to €7.65 an hour, but the government said it would still be one of the highest rates in the EU.

The EU’s economic commissioner Olli Rehn said the package was “a sound basis for the negotiations” on the international bailout.

But the austerity plan got an angry reception from unions.

“It’s a roadmap to the Stone Age. €14.5 billion have already been taken out (in the last two years) and have resulted in no growth,” said Jack O’Connor, general president of the Services, Industrial, Professional and Technical Union (SIPTU) which represents over 200,000 Irish workers.

The opposition Labour party said the 140-page document showed the government was resorting to “crude cuts, rather than to reform”.

As Ireland strove to prove it was trying to get its house in order, another heavily-indebted eurozone country, Portugal, was paralysed by a general strike yesterday called to protest against deep spending cuts.

The EU fears Portugal will be the next eurozone nation to require a bailout after Greece and Ireland.