WRAPUP 6-EU urges feuding Irish not to delay budget

* EU’s Rehn urges Ireland not to delay budget, aid talks

* Cowen challenges opposition to let budget pass before poll

* Merkel says Ireland’s crisis just as worrying as Greece’s

* Dutch say Irish bank bondholders must “bleed”

(Updates with opposition leader, IMF, Dutch, French ministers)

By Gilbert Reilhac and Jodie Ginsberg

STRASBOURG/DUBLIN, Nov 23 (BestGrowthStock) – The European Union
urged Ireland on Tuesday to adopt an austerity budget on time to
unlock promised EU/IMF funding, in response to a deepening
political crisis that could derail the financial rescue.

Dublin’s government is on a knife-edge. Damaged Prime
Minister Brian Cowen has rebuffed calls for a snap election and
insisted the budget would go ahead as planned on Dec. 7 before
he calls an early poll.

Opposition leader Enda Kenny hinted in parliament that his
centre-right Fine Gael party might let the budget pass, saying
it would act in the national interest, and challenged Cowen to
bring it forward to next week, but the prime minister refused.

Cowen said he expected all budget legislation to be
completed by February, suggesting he would not call an election
in January as hs coalition partners had requested.

European Monetary Affairs Commissioner Olli Rehn told
reporters after meeting Irish members of the European Parliament
in Strasbourg, France: “Stability is important.

“We don’t have a position on the domestic democratic
politics of Ireland but it is essential that the budget will be
adopted in time and we will be able to conclude the negotiations
on the EU-IMF programme in time.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TAKE A LOOK- Europe's debt problems [nLDE68T0MG] Euro zone debt struggle graphic http://r.reuters.com/hyb65p Multimedia on Euro Zone Crisis http://r.reuters.com/hus75h Graphic on Irish parliament http://r.reuters.com/ges76q Analysis on Irish political scenarios [ID:nLDE6AL28Z] Breakingviews column on EU bailouts [ID:nLDE6AL1P1] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

In New York, senior IMF official John Lipsky said talks with
Ireland were moving forward quickly but it was up to the Irish
government to make the necessary political decisions.
[ID:nN23131647]

On Tuesday, the small leftist Sinn Fein party submitted a
motion of no confidence in Cowen, but it is unlikely to be
debated or put to a vote because the party lacks the required 12
signatories. [ID:nLDE6AM18M]

Cowen also faces critics in his own Fianna Fail party who
want him out, though most want him to quit after the budget.

Trade unions have warned that the austerity plan could
provoke civil unrest: a student demonstration over planned fee
increases turned violent this month, and unions have organised a
march to protest at the planned measures on Saturday in Dublin.
Tens of thousands are expected to turn up.

PUBLIC FURY

Opposition politicians said they took Rehn’s comments
seriously and were aware of the implications for the stability
of the euro zone.

“We’re in an impossible situation here. We’re being asked to
tacitly support a budget that we haven’t seen,” Fine Gael
lawmaker Brian Hayes told public broadcaster RTE.

EU partners are watching the Irish turmoil with concern.
German Chancellor Angela Merkel told employers that Ireland’s
crisis was different from Greece’s but just as worrying and the
euro was in an “exceptionally serious situation”.

Dutch Finance Minister Jan Kees de Jager said it would be a
bad idea to throw Ireland out of the euro or split the single
currency area with southern countries devaluing, since that
would provoke “a chain of unwanted events”. [ID:nLDE6AM1TW]

But he told RTL 7 television: “Shareholders and holders of
subordinated bonds in Irish banks will have to bleed in a
restructuring”.

Greece, the first country to be bailed out by the euro zone
and the IMF earlier this year, won a vote of confidence from EU
and IMF inspectors on Tuesday after promising extra measures to
shore up its ailing finances.

Cowen has defied calls to quit, saying the national interest
required that he press on to unveil a promised four-year
austerity package on Wednesday.

A delay in adopting the budget would almost certainly
prevent the release of the first bailout loans under IMF rules.
A European Commission spokesman reminded Ireland that every day
that passes was having an impact on its economy.

He also said it was hard to imagine Ireland remaining a low
tax country, an apparent reference to Dublin’s ultra-low 12.5
percent corporation tax rate, an irritant to EU partners.

Both De Jager and French Economy Minister Christine Lagarde
said Ireland would have to raise taxes as part of the deficit
cutting package. The Dutchman said it would make more sense for
Dublin to raise VAT than corporation tax.

Anger at Cowen’s handling of Ireland’s economic and banking
crisis has ballooned since he announced the bailout, and his
chances of passing the budget fell dramatically when two
independent lawmakers said they were likely to withhold support.

Some voters questioned at random in Dublin said they had
more faith in the IMF than in their own politicians. “At least
the IMF might know what they’re doing,” said Margaret, 49, an
office worker, who declined to give her family name.

“I would love to have thrown my book at the TV as Cowen was
talking last night, but I couldn’t afford a new TV,” she added.

AUSTERITY PLAN

The Irish government is expected to announce it will cut the
minimum wage, social welfare spending and the number of public
employees and add a new property tax and higher income taxes in
a package intended to shave 6 billion euros off next year’s
budget, and 15 billion off the annual budget by 2014.

The IMF said in a paper released on Monday that Ireland
should gradually lower unemployment benefits and cut its minimum
wage to boost employment. [ID:nLDE6AM0TM]

EU partners and the IMF agreed in principle on Sunday to
rescue Ireland with an expected 80 to 90 billion euros in loans
to try to stop its crisis continuing to undermine the value of
Ireland’s traded debt and that of countries with similar
problems — notably Portugal and Spain.

European financial markets slid on Tuesday, partly because
of the mounting political uncertainty in Ireland and fears of
contagion to other weak euro zone countries.

Irish shares (.ISEX: ) were down as much as 3 percent, the
cost of insuring Irish and Portuguese debt against default rose
and the risk premium investors charge to hold Irish government
bonds crept up further. [GVD/EUR]

Central bank governor Patrick Honohan said all the country’s
banks were up for sale and he expected the EU and the IMF to
attach many conditions to a financial rescue. [ID:nLDE6AM0MB]

(Additional reporting by Padraic Halpin and Lorraine Turner
in Dublin, Marcel Michelson in Amsterdam, Gernot Heller in
Berlin, Leigh Thomas in Paris; Writing by Paul Taylor; editing
by Tim Pearce)

WRAPUP 6-EU urges feuding Irish not to delay budget