Irish opposition vows to upend austerity plan

Associated Press
Irish Prime Minister Brian Cowen  speaks to the media at government buildings,  Dublin, Ireland, Wednesday, Nov. 24, 2010. Ireland unveiled the harshest budget measures in its history Wednesday, a four-year plan to slash deficits €15 billion ($20 billion) so it can get a massive bailout from the European Union and the International Monetary Fund.(AP Photo)
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Opposition leaders vowed Thursday to rewrite Ireland's harsh four-year austerity plan if, as expected, they oust Prime Minister Brian Cowen in early elections next year.

European Union and International Monetary Fund experts negotiating an estimated euro85 billion ($115 billion) bailout for Ireland have demanded that the country make binding commitments to slash its deficit — now the worst in Europe — as a condition of any aid.

To that end, Ireland unveiled Wednesday a plan to cut euro15 billion ($20 billion) from its deficits through 2014, starting with a 2011 budget, which the government will present to parliament on Dec. 7.

Opposition chiefs have refused to confirm whether they will support that budget, which will seek euro4.5 billion ($6 billion) and euro1.5 billion ($2 billion) in new taxes. The government says the budget's defeat would imperil Ireland's efforts to save its banking system from collapse — and sabotage any hope of getting an EU-IMF loan.

Enda Kenny, leader of the main opposition Fine Gael, told lawmakers his party would redraft the four-year plan when it wins power.

"The next government will not be bound by it," he said. Kenny's party said it would seek to overturn a planned cut to Ireland's minimum wage.

Labour Party leader Eamon Gilmore, Kenny's most likely coalition partner, said the government's 2011-14 plan offered too few details on how to create new jobs in a country where unemployment has doubled in the past two years to 13.6 percent.

"This plan is the price of political failure, and it's very heavy price indeed," Gilmore said.

Cowen is expected to call an early election by March because of a threat by his government's junior coalition member, the Green Party, to withdraw once the 2011 budget is passed. The Greens expect an election by January, but Cowen says votes on the budget's tax hikes and welfare cuts could be delayed until February.

Finance Minister Brian Lenihan said he was confident opposition leaders would just abstain during the budget votes. He said even if they tried to block the budget, the government would have enough votes to win.

Lenihan, speaking to a Thanksgiving luncheon for American businesses in Ireland, said the government's ability to win budget votes would "send a signal to the world that Ireland remains a country with huge economic potential."

But analysts say the government's parliamentary majority is about to sink further when the winner is declared Friday for a special election in northwest Ireland.

Cowen had left the seat in Donegal South West vacant for 17 months in fear the opposition would win. He was forced to hold the election after the favored candidate, Sinn Fein's Pearse Doherty, successfully sued and forced the government to hold the vote.

Doherty's expected victory would reduce Cowen's majority to just two votes in the 163-member chamber. However, many analysts expect the opposition Fine Gael party to abstain from key votes on the budget, which would give it easy passage.

Sinn Fein said two of its lawmakers met with IMF representatives Thursday and told them "they are neither wanted nor needed in Ireland."

John O'Connor, president of Ireland's Congress of Trade Unions, said his group would meet with the IMF and European Union on Friday. The organization, which is holding a protest march in Dublin on Saturday, advocates extending the deadline to reduce the country's deficit to 2017.

Lenihan emphasized to the U.S. business executives that his government would never increase Ireland's 12.5 percent tax on business profits. The rate, among the lowest in Europe, is a key reason why American businesses choose Ireland over other western European countries, where the tax rate is nearer 30 percent. Some 600 U.S. businesses have bases in Ireland.

Britain, France, Germany and Austria have all insisted that Ireland raise that corporate tax rate, especially since they will be bailing out the Irish. But Lenihan said negotiators from the IMF and the European Central Bank had not even raised that question.

"The 12.5 percent rate of corporation taxation has not been under discussion and will not be under discussion," Lenihan said to applause. "It's not an issue in these negotiations. Ireland would not have a credible growth strategy were it introduced as an issue."

Lenihan said other European nations pressing Ireland to raise its business tax "have hidden subsidies for their own industrial base."

Ireland's deficit this year is forecast to reach 32 percent of GDP, a modern European record, fueled by the billions it has spent bailing out Irish banks who gorged themselves on overpriced real estate.

Most financial sector stocks fell again on the Irish Stock Exchange, as investors worried the value of their stock could be badly dented if the government is forced to seize majority control of Allied Irish and Bank of Ireland — two of the country's dominant banks.

Allied Irish closed down at euro0.32, while Irish Life & Permanent — an insurance and mortgage specialist that has yet to receive a state bailout — dropped to euro0.595.

Shares in Bank of Ireland rose slightly to close at euro0.272, up from a closing price of euro0.27 on Wednesday.

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