Ireland’s emergency budget unveiled

| April 7, 2009 | 0 Comments

Ireland’s Government has now unveiled details of its second budget as the country’s budget deficit spirals out of control.

Finance Minister, Brian Lenihan, said the country faces a “very grave national crisis” after the country’s deficit nears 13% of GDP - quadruple the level allowed by the European Union.

The emergency budget includes a hefty increase in taxes and spending cuts, with Mr Lenihan announcing that new tax measures would raise €1.8 billion in 2009, while €1.5 billion is hoping to saved by the spending cuts.

According to the Finance Minister, the new measures will leave Ireland with a new budget deficit target of 10.75% of GDP this year, while this is an improvement on the 12.75%, it still remains above a previous target of 9.5%.

Furthermore, Mr Lenihan said a “bad bank” will be established and will take on up to €90 billion in bad assets in a bid to restore confidence and lending.

It is hoped the emergency budget will restore the damaged banking system and restore lending, protect jobs and restore the country’s reputation overseas.

The country had experienced a boom since the late 1990s, with multinationals arriving to take advantage of one of the lowest corporate tax rates in the euro zone.

However, the ailing housing market has had a major impact on the economy and property prices have plunged by 40% since their high in 2006.

Last week, rating agency, Standard & Poor’s (S&P‘s) downgraded Ireland’s credit rating from AAA to AA+ and put the Irish Republic on a “negative” outlook, meaning that further downgrades are possible.

Ireland, which was the first country in the euro zone to enter recession, has also experienced a sharp rise in unemployment. The unemployment rate is creeping towards 12%.

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