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ISEQ steady as Government meets

Tuesday, September 04 09:14:35

The ISEQ is up a little this morning at 3,175, up 5 points as markets await Thursday's ECB meeting which promises to deliver some direction to bond and stock markets alike. Government tensions ahead of the budget are emerging already or are these just a media invention as the silly season comes to an end. Goodbody Stockbrokers has an opinion:

The Irish Government is set to hold its first cabinet meeting after the summer break today. It is set to be a rather stormy affair. With Budget 2013 coming into view, tensions have risen between the coalition partners. This pushed the Minister for Public Expenditure and Reform, Brendan Howlin, to call for calm, reiterating that the Government was elected with a very significant majority to do a very challenging job and it would serve out its full five-year term.

At the heart of the differences is the issue of further cuts in the health sector in a bid to bring spending plans back to targets. On this, Minister of State for European Affairs, Lucinda Creighton, is quoted in this morning's Irish Times saying that no-one should be surprised by recent announcements in relation to the health sector: "Whinging and pretending that you were surprised by budget figures that were agreed last December is not really credible". This is an important point. Ireland signed up to a Memorandum of Understanding with the Troika that contained certain targets.

Failure to meet these targets was always going to trigger demands from the Troika to correct the overspend with new measures. as long as the overspending was not as a result of a shortfall in economic growth.

A more important point here though is the fact that these tensions have emerged in relation to 2012 spending plans and over a relatively small amount of money (E130m). Further spending reductions of E2.25bn are in the pipeline for Budget 2013 in December as well as E1.25bn in tax increases. While sentiment towards Ireland has improved recently, rising political tensions are a reminder not get too complacent about the still tough road ahead according to Goodbody Stockbrokers.