By Alex Canepa
Last week Taoiseach Brian Cowen stated before the Dáil the need for fiscal austerity measures. Cowen and the Minister for Finance, Brian Lenihan, maintain that aggressive front-loading would significantly strengthen the country’s balance sheets in the coming four years.
The fiscal budget has unsettled members of the USI, which claims the Government plans to increase the Student Charge to €3000 next academic year. The Union is fronting an “Education not Emigration” campaign in protest against government cuts.
According to the proposed budget, the specifics of which will be unveiled in the coming weeks, the government plans a budgetary adjustment of ¤15bn over the next four years in an effort to reduce the fiscal deficit and restore confidence in the Irish economy. Cowen has revealed the budgetary adjustment will largely take the form of direct public sector cuts.
The new round of proposed cuts comes on the heels of a meeting between the Finance Minister and the EU Monetary Affairs Commissioner Olli Rehn, in which Rehn expressed the need for Ireland to reduce its budget deficit from its current 14.4 percent to 3 percent by 2014 in order comply with EU rules. It is likely that an official budget will be unveiled after Rehn visits Dublin in early November to discuss specifics with the cabinet and opposition leaders.
Lenihan told journalists on Tuesday last that the projected deficit reduction assumes an annual growth rate of 2.75 percent. The Minister went on to note that a proactive attempt to improve Ireland’s balance sheet would not only bring Ireland into compliance with the EU Commission, but would assure international credit markets of Ireland’s solvency and fiscal security.
Minister for Tourism and Sport Mary Hanafin noted that no department would be immune from cuts, even going as far as to indicate that reductions in child benefits were possible. The Government’s proposed cuts accompany the UK’s controversial and highly publicised austerity measures in which the new coalition government plans to cut £81bn (¤93bn) over the next four years. Although the UK cuts have not taken full effect, some economists have warned that drastic government cuts might produce a double-dip recession.
However, this claim is refuted by strong numbers coming out of London. This week showed better than projected financial sector growth in the UK (Moody’s, Standard & Poor), strengthening the case made by Fianna Fáil and the British coalition government for the efficacy of austerity in the face of recession.
Cowen’s proposed cuts are not without critics. Labour leader, Eamon Gilmore, has accused the Government of not furnishing all available data and budget projections to the opposition during recent briefings, and commented on a significant “lack of information” regarding the specifics of the cuts and how they would numerically reduce the deficit.
In a more general attack, expressing much of the opposition’s frustration, Labour Party spokeswoman Joan Burton claimed that Cowen was “adverse to new ideas, and to changes” insisting that the people of Ireland need “realistic, fresh hope that turns this economy around”. The final budget is expected in early November, after Commissioner Rehn’s visit and the continued negotiations between the Government and the opposition.
