Ireland set to ease austerity as bailout exit looms

Reuters

* Presents seventh austerity budget in six years on Tuesday

* Will ease austerity before December bailout completion

* Growth seen accelerating in 2014, budget gap falling

* Still not clear where cuts will fall

DUBLIN, Oct 15 (Reuters) - Ireland is set to ease austerityin a 2014 budget to be unveiled on Tuesday, attempting to givehard-pressed voters a break as it gets ready to end itsdependence on an international bailout later this year.

Dublin is using savings from a landmark deal on its bankdebt to make fewer cuts than originally planned for a populationof 4.6 million that is weary of six years of tax hikes, spendingcuts, high unemployment and hefty debts.

Having consistently hit targets to rebalance its economy,Ireland is confident it will be the first of the euro'sdebt-laden economies to complete a three-year EuropeanUnion/International Monetary Fund bailout programme in December.

That will be a vital landmark for the centre-right-ledcoalition government to show it is regaining economicsovereignty and Brussels to claim its austerity policies arebearing fruit.

"Growth momentum is picking up, with a possible carry overinto 2014," said Alan McQuaid, chief economist at MerrionStockbrokers. "Markets will probably see it as a final steptowards exiting the bailout."

By making smaller cuts, Finance Minister Michael Noonan isgoing against advice from his own central bank and initialmisgivings from the EU and IMF. But given Ireland has hit allits targets, it is unlikely to complicate completion of the 85billion euro bailout.

Noonan has already revealed a lot of the economic forecaststhe country's seventh austerity budget since 2008 will be basedon, saying the adjustment will be 2.5 billion euros,substantially less than the 3.1 billion originally agreed.

He expects economic growth to accelerate to 1.8 percent in2014 from 0.2 percent this year, which will help to bring thebudget gap down to a targeted 4.8 percent of gross domesticproduct, below a 5.1 percent target agreed with lenders.

Noonan, whose budget plans will again focus more on spendingcuts than tax hikes, forecasts a 7.3 percent deficit this year,still one of the highest in the EU, and aims to deliver a smallprimary budget surplus in 2014.

What remains unclear is where cuts will fall and whetherNoonan will choose to ease off in some areas. He is expected toreverse a cut in sales tax which had boosted the hospitalitysector and increase capital gains tax.

Some media have reported he will add to free healthcare foryoung children and may consider cutting sales tax onconstruction to encourage an industry almost wiped out by thecrash but which is now showing signs of life.

Bookmaker Paddy Power gives odds of 6/1 on "recovery" beingthe first of the austerity era's buzzwords to be wheeled out inNoonan's speech, followed by "euro zone" and "bailout" at 7/1."Sacrifice" was at 12/1 and "persevere" at 20/1.

"Recent budgets haven't been associated with good news but afree tin of biscuits for Christmas would certainly brighten upan otherwise dreary Tuesday," the betting firm said in astatement.

View Comments (0)