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News : Irish Economy Last Updated: Oct 28, 2010 - 8:33:11 AM

Irish Budget 2011: Lenihan tells Dáil the Irish people will have to accept cuts in public spending and higher taxes; EU backing is of key importance
By Finfacts Team
Oct 27, 2010 - 4:40:32 PM

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Finance Minister Brian Lenihan today told the Dáil the Irish people will have to accept cuts in public spending and higher taxes. He also said EU backing is of key importance.

In a speech during a two-day debate on the economy, he said there was a danger that foreign buyers of our bonds would stop lending if we did not act soon to live within our means. He said that if action were delayed, the problems would not only remain but get worse.

The Minister for Finance said: "The endorsement of the EU Ministers, the Commission and the ECB will be of key importance in demonstrating to the markets the soundness and credibility of our Plan."

On Tuesday, the Government said a fiscal adjustment of €15bn over the four-year period 2011-2015 was required. A detailed four-year plan will be published next month.

The Minister said the language used in debating issues related to economics and the public finances is often perceived by the general public as lacking in clarity, directness and impact. "I therefore want to state the Government’s position on its consolidation plan simply and as follows:

  • The cost of the public services that we are using is far higher than our current tax revenues;

  • Economic growth will not on its own deliver sufficient revenue to close the gap for some years to come.

  • This means that for the difference between what we are spending and what we collect in revenue has to be borrowed;

  • The cost of borrowing is high and rising and if we do not act soon to live within our means, the people that we are borrowing from may stop lending to us;

  • If this were to happen, the continued provision of an adequate range of public services and social supports would be impossible to guarantee;

  • The Irish people will therefore have to accept cuts in public expenditure and higher taxes.

  • Even though these measures will be painful, we will continue to enjoy most of the substantial increases in living standards that were gained over the past ten years or so and they will provide the basis for regaining what we have temporarily lost."

Fine Gael's finance spokesman Michael Noonan said things were bad, adding that there was no growth, no hope and no economic plan.

He said the 3% deficit target could be achieved by a €9bn adjustment and Fine Gael was not buying into the €15bn figure announced by the Government.

He also said the Finance Minister's and the Government's biggest problem was that no-one believed them anymore and that credibility had been lost.

Labour's finance spokesperson called the current government 'pathetically stupid' and said Fianna Fáil's pervasive helplessness was killing the country. Joan Burton also said a change of government would make the bond markets feel that Ireland is 'on the up'.

Oireachtas Broadcasting

Finfacts Budget 2011 Page

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