Drastic cuts plan to save economy
The Government will publish its €15bn plan for drastic savings today as it battles economic ruin against a backdrop of political turmoil and a further downgrading of the country's credit rating.
Significant tax hikes, new levies in property and water and cuts to the dole and minimum wage are expected in the 150-page four-year budget road map.
Taoiseach Brian Cowen has called for solidarity across the political system, while social justice campaigners demanded the poorest were spared.
Opposition parties were warned the country’s bail-out was only secure if swingeing cuts and tax rises and a more detailed €6bn Budget on December 7, were passed.
The final EU/IMF loans figure is believed to be in the region of €85bn to recapitalise the banks and pay for public spending.
The plan involves raising the level of capital in Irish banks from 8% to 12% in order to reassure depositors and boost confidence in the financial sector.
The package would also see the government take a majority stake in Bank of Ireland, while AIB would become 99.9% state-owned.
Details of the massive loan agreement are not expected to be finalised until early next week.
There are also worries in some circles of a sustained bank-run by fearful customers.
Irish banks have seen €23bn in deposits leave the country this year.
Guaranteeing Ireland’s solvency is also seen by EU governments, and officials in Dublin, London, Brussels and Frankfurt, as essential to protecting the Euro as a currency.
“Contagion” has been the fear across Europe with worries the Irish financial and economic chaos will spill over to troubled nations like Portugal, Spain and Italy.
Meanwhile Standard and Poor's has further downgraded Ireland's credit rating from A to double-A.
The credit rating agency also says it is putting Ireland on credit watch "with negative implications", which means a further downgrade could be imminent.
It says concern is rising that Ireland may not have the political will and ability to see through any rescue agreement.
Mr Cowen last night denied he was clinging to power as the Opposition demanded he bring forward next month’s Budget.
The Taoiseach also dismissed calls to revise a timetable to strike a deal on the bail-out.
“My sole motivation is to ensure that a four-year plan is published... and that a budget is passed by this House,” Mr Cowen told the Dáil.
Mr Cowen also spent several hours with his Fianna Fáil parliamentary party last night were a number of TDs questioned his leadership.
The Taoiseach told colleagues he felt he had a job to do and was focused on what needed to be done.
The Government’s chief whip John Curran denied rumours of a heave and claimed the overwhelming number of people who spoke on the leadership issue were “absolutely supportive of the Taoiseach”.
Mr Curran said he believed the Government had the numbers to get the December 7 Budget through the Dáil.
Former Minister Mary O'Rourke has proposed holding a special meeting in January to deal with the leadership issue.
The coalition government has the support for the drastic cuts from partners the Greens, who want a general election in late January.
But two Independent TDs – crucial to the razor-thin majority – insist their support cannot be relied upon.
The legalities of passing a budget mean that the new year poll, which Mr Cowen has agreed to, could be pushed back as far as late February or March.
Pressure was also mounting after the IMF issued a position paper stating that minimum wage and dole payments should be cut.
The document, signed off by lead negotiator in Dublin Ajai Chopra on Monday, said Ireland had to tackle its rising unemployment rate and should gradually reduce benefits over the time a person is out of work and impose stricter job search requirements,
