Dublin - Ireland is set to ease austerity in its 2014 budget to be unveiled on Tuesday, attempting to give hard-pressed voters a break as it gets ready to end its dependence on an international bail-out later this year.
Dublin is using savings from a deal on its bank debt in order to impose fewer cuts than originally planned on a population of 4.6 million that is weary of six years of tax increases, spending cuts, high unemployment and hefty debts.
Having consistently hit targets to rebalance its economy, Ireland is confident it will be the first of the euro's debt-laden countries to complete a three-year European Union/International Monetary Fund bail-out programme in December.
That will allow the centre-right-led coalition government to show it is regaining economic sovereignty and Brussels to claim its austerity policies are bearing fruit.
“We want to position the country to exit the bail-out so that we can put this phase of Irish history behind us and build the economy and build the country going forward for everybody's future,” Finance Minister Michael Noonan told journalists on his way into parliament ahead of his budget statement at 14:30 SA time.
By making smaller cuts, Noonan is going against advice from his own central bank and initial misgivings from the EU and IMF. But given that Ireland has hit all its targets, it is unlikely to complicate completion of the 85 billion euro bail-out.
He has already revealed a lot of the economic forecasts that the country's seventh austerity budget since 2008 will be based on, saying the adjustment will be 2.5 billion euros, substantially less than the 3.1 billion originally agreed.
The measures would mean that Ireland will have made 95 percent of the 33 billion euros in spending cuts and tax hikes needed to bring its deficit down to the EU limit of 3 percent, Goodbody Stockbrokers estimated.
Noonan expects economic growth to accelerate to 1.8 percent in 2014 from 0.2 percent this year, which will help to bring the budget gap down to a targeted 4.8 percent of gross domestic product, below a 5.1 percent target agreed with lenders.
Noonan, whose budget plans will again focus more on spending cuts than tax hikes, forecasts a 7.3 percent deficit this year, still one of the highest in the EU, and aims to deliver a small primary budget surplus in 2014.
“Growth momentum is picking up, with a possible carry over into 2014,” said Alan McQuaid, chief economist at Merrion Stockbrokers.
“Markets will probably see it as a final step towards exiting the bail-out.”
What remains unclear is where cuts will fall and whether Noonan will choose to ease off in some areas.
He is expected to reverse a cut in sales tax which had boosted the hospitality sector and increase capital gains tax.
Newspaper front pages focused on reports of a cut to the number of pensioners entitled to free medical care and the scrapping of a free telephone allowance for older people.
Other reports said Noonan would add to free healthcare for young children and may consider cutting sales tax on construction to encourage an industry almost wiped out by the crash but which is now showing signs of life.
Bookmaker Paddy Power gives odds of 6/1 on “recovery” being the first of the austerity era's buzzwords to be wheeled out in Noonan's speech, followed by “euro zone” and “bail-out” at 7/1.
“Sacrifice” was at 12/1 and “persevere” at 20/1.
“Recent budgets haven't been associated with good news but a free tin of biscuits for Christmas would certainly brighten up an otherwise dreary Tuesday,” the betting firm said. - Reuters