Instant View: Ireland unveils 4-year austerity plan

(BestGrowthStock) – Ireland set out a four-year plan on Wednesday, aiming to make 15 billion euros worth of savings to bring down its record deficit.

Following are reactions to the plan:

KEVIN MCLOUGHLIN, HEAD OF TAX SERVICES, ERNST & YOUNG

“Companies will welcome the Plan’s strong endorsement of the 12.5 percent rate of corporation tax as a key cornerstone of tax and economic strategy.

“There has been much uncertainty in recent weeks about the longevity of the rate, so this endorsement within the terms of the plan should help reduce those concerns.

“Business will welcome some of the other proposals which are key to continued competitiveness such as the reduction in the minimum wage, possible reduction in business rates, and reduction in bureaucracy.”

JOHN BEGGS, CHIEF ECONOMIST, AIB GLOBAL TREASURY, DUBLIN

“I think this is an achievable comprehensive range of proposals that has been outlined, in particular it’s good to see the need for spending cuts is being balanced with a plan for economic growth. That said, I think its quite clear we are going to have a general election and it is likely we will have a change of government.”

HEINO RULAND, STRATEGIST, RULAND RESEARCH, FRANKFURT

“The measures look nice on paper, but I doubt the mainstream Irish population will like them. And what night cause concern, particularly at the German end, is that they are sticking to the corporate tax rate of 12.5 percent.

“And calling an election raises questions about what the new government will do.”

ALASTAIR NEWTON, POLITICAL ANALYST, NOMURA “Will it pass? The short answer is probably. The Irish are resigned to their circumstances, albeit coupled with enormous resentment of the political classes. But the EU needs to be careful: notably Christine Lagarde speaking today about the need for Ireland to hike taxes could stir up additional ill feeling especially given all last week’s talk in France and Germany about corporate tax rates. Pressing like this risks being seen as undermining Ireland’s fiscal sovereignty.

“Then, of course, early elections are very likely. Fine Gael has committed to re-examine any EU/IMF proposals, which implies reopening the budget too.”

JACK O’CONNOR, PRESIDENT, IRISH CONGRESS OF TRADE UNIONS

“This is not just a plan for the next four years, it is effectively a blueprint for the architecture of Ireland for upwards of the next 50 years.

“Despite the collapse, those who brought it about have no intention of going away.

“Quite the contrary, they are busily exploiting this devastating catastrophe to re-engineer our economy and society according to an even crueler blue print which more effectively reflects their interests.

“The agenda is manifestly evident in the calls for the reduction of the minimum wage, the dismantlement of public services and the sell-off of state assets at bargain basement prices.”

MELANIE BOWLER, ECONOMIST, MOODY’S ANALYTICS, LONDON

“Despite the plan, the political uncertainty remains a key trouble in the eyes of the market and needs to be resolved quickly to get things settled. But I think the plan will be pushed through. I don’t think there’s any other choice than to make it work. We can see from the reaction of markets that Ireland really has been forced into this position.”

WILL HEDDEN, SALES TRADER, IG INDEX, LONDON

“There is nothing in there that is particularly radical. VAT increases and other cuts seem fairly understandable and for that reason it hasn’t moved markets too much. They’re still expecting to grow in this period, which may be the thing that they’re overstating.”

JIM POWER, CHIEF ECONOMIST, FRIENDS FIRST

“From the details we’ve seen so far, there are no major surprises. I suppose the big challenge is to try and deliver it, it’s going to be difficult, it’s going to be painful but there’s no choice.

“I think the package will be delivered by Brian Cowen’s successors rather than Cowen, I mean, in the overall scheme of things Brian Cowen has become history.”

“I think it’s a very close call, I think it’s going to be very dangerous to take 15 billion out of an economy in a deep recession.”

JAMES NIXON, CHIEF EUROPEAN ECONOMIST, SOCIETE GENERALE

“It’s a staggeringly austere budget, the cuts are deep and it will hurt.

“The main thing that stands out is that they still expect the economy to grow by 2.7 percent over the next 4 years but it’s hard to see how that can be true.

“They’re taking 4 percent of GDP out of the economy next year which is going to hurt and we are in an environment where the ECB are headed for the exit and interest rates and the euro are going to be higher so it doesn’t really add up.

“What is a little odd is that they are publishing this now while the IMF are pouring over the books and deciding what needs to be done. It rather smacks of trying to bounce the IMF into agreement.”

Instant View: Ireland unveils 4-year austerity plan