Instant View: Ireland presses tough austerity budget

DUBLIN (BestGrowthStock) – The Irish government urged parliament on Tuesday to approve a tough 2011 austerity budget which foresees 6 billion euros ($5.1 billion) in savings and must win passage for the country to receive emergency loans from the EU and IMF.

Following are analysts’ comments on the budget package.

AUSTIN HUGHES, CHIEF ECONOMIST, KBC BANK: “There’ll be a sigh of relief in Europe that there’s no obvious gaffe that would threaten to have the budget voted down and cause chaos in European markets.

“In broad terms, it’s a budget that spreads the pain very wildly and in that respect may do less damage to the economy than feared. There’s no question that 2011 will be a tough year for the Irish economy.

“I suspect we’ll see some signs of growth emerge in the not too distant future, and the economy will start to look clearly better by this time next year.”

EAMON GILMORE, LEADER OF THE Labor PARTY

“This budget is every bit as bad as we feared. It marks the culmination of a series of disastrous Fianna Fail policies that have led to the worst economic crisis this country has ever faced, the sell out to the IMF and the EU and levels of unemployment that have been in excess of 400,000 for over 18 months in a row.

“The real tragedy is that having done all this damage, Fianna Fail risks compounding their earlier mistakes, such as the blanket bank guarantee and NAMA, with a budget that takes an additional 6 billion euros out of the economy.

“There is little or nothing to promote job creation and training and the few token measures included in the budget speech will make no dent in the live register figures.

“The cuts in social welfare rates were well flagged will create real hardship for those on the lowest levels of income, particularly for groups such as widows, the blind and carers.”

STEPHEN KINSELLA, PROFESSOR OF ECONOMICS, UNIVERSITY OF

LIMERICK

“The government had the opportunity to bring in a property tax and they didn’t, they had an opportunity to bring in a water tax, and they didn’t, they had the opportunity to rebalance the nature of taxation in the economy.

“They didn’t do that. They bottled it. The pension bill is the biggest problem in the state and they didn’t really touch that.

“They were pretty fair to people on lower social welfare and they were pretty fair to job seekers as well. On the negative side, they’ve left the incoming government with a huge amount to do and it could have been a much bolder step forward to fiscal consolidation which they simply didn’t take.”

NEIL GIBSON, ECONOMIC ADVISOR AT ERNST & YOUNG

“The headline message is the numbers in the budget remain extremely optimistic about economic growth. The finance minister is predicting a level of economic growth that we don’t think will be achieved given the amount of money that will be taken out of the economy.

“The budget clarifies the position of how we’ll get the economy back in balance, but it’s banking on extremely strong recovery that we don’t think is possible.

“It was probably the only budget that could be written. Nevertheless it is reliant on spectacular performance, that at the very best is unlikely and carries massive risks that they won’t be able to achieve the levels of growth. So this may not be the end of the story in terms of rebalancing and recovering the Irish economy.

“… it will require spectacular economic growth in the export market to have any chance of the finance minister’s projections become a reality. It’s a big gamble.

“To have managed to keep corporation tax low and made modest attempts at job creation, it shows the government is sensitive to the problems but their hands are tied in terms of what they can actually do because there’s so many people scrutinizing what they’re doing.”

EAMONN SIGGINS, CHIEF EXECUTIVE OF THE INSTITUTE OF

CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

“Consistent with the National Recovery Plan, the 2011 budget will see 4 billion euros in spending reductions and 2 billion euros in tax increases, however spending cuts and an increased tax take in themselves will not be sufficient to increase our

GDP.

“We need to do more to protect key incentives to generating enterprise. There is no evidence here of a solid strategy to improve our international competitiveness, boost consumer confidence, grow indigenous business or create jobs. We appreciate that the fiscal challenges of this year’s budget were huge however, from a business perspective; more could have been done to create a platform for long term economic recovery. This budget was a tax gathering exercise with little stimulus.”

PETER STAPLETON, PRESIDENT, SOCIETY OF CHARTERED SURVEYORS

“While great strides have been made to complete Ireland’s infrastructure jigsaw, the last pieces need to be put in place.

We are pleased that government will harness the power of the National Pension Reserve Fund and use this period of low tender prices to finish the national public infrastructure project. Nonetheless, more direct investment is needed to secure jobs in the short-term and position Ireland to return to growth in the long-term.”

THERESA REIDY, COLLEGE LECTURER IN GOVERNMENT AT UNIVERSITY

COLLEGE CORK, SPECIALISES IN PUBLIC FINANCE:

“The first thing is it seems that much of what was contained in the budget was well-flagged in advance. There don’t appear to have been surprise measures.

“The big winners are the pensioners who have been exempt paying for the crisis. The losers are the taxpayers and people who are receiving welfare payments from the government. They are the most significantly hit in the budget. There has been a reprieve for public sector workers.

“It seems that the budget is going to go through at this point, that was pretty much assured yesterday. It is likely that there is going to be an election in the first three months of the year. It doesn’t look likely that Fianna Fail will be likely to drag into April.”

“In terms of Fianna Fail, (Prime Minister Brian Cowen’s position) is safe until a challenger arises within the party.”

Instant View: Ireland presses tough austerity budget