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Tanaiste: Era of austerity is now over

Wednesday, August 06 15:50:11

Ireland will end the kind of austerity measures required under the bailout with October's Budget as the economy looks to be growing faster than expected, Tanaiste Joan Burton said today.

The Government won praise in Europe for meeting all major targets under the E85 billion aid programme it completed last year but suffered at the local elections in May as voters expressed frustration at more than half a decade of budget cuts.

That prompted a change of leadership in the Labour Party, and its new leader, Joan Burton, told Reuters that the era of severe tax hikes and spending cuts had come to an end - even though the budget still needs to be squeezed.

"I said quite early on that it wouldn't be necessary to have the kind of cuts that were the feature of the 'Troika' years' budgets," Burton said.

"We have now emerged from that period and are coming into a growth period. We of course have to be extremely careful to manage it properly but also have to be conscious that we have a growth that people can actually feel."

Burton's comments come after data yesterday showed the country's tax take for 2014 was 2.5 percent ahead of target at the end of July, a trend finance minister Michael Noonan said would ensure budget cuts "somewhat less" than the 2 billion euros originally planned for October.

Burton, who is also minister for social protection, said it was too early to say by how much Ireland would beat its budget deficit target of 4.8 percent for 2014, but that the buoyant income tax and employment figures had eased the pressure for cuts in her department significantly.

She said it was "quite possible" the government would revise upwards its 2014 gross domestic product forecast of 2.1 percent ahead of the budget after new EU rules on calculating economic output were more favourable than anticipated.

Ireland is also seeking to reduce the cost of carrying its debt by repaying its more expensive IMF loans early, before it repays aid from the euro zone bailout fund, a move that needs agreement from its partners in Europe to change the terms.

Noonan, who sits alongside Burton, Public Expenditure Minister Brendan Howlin and Taoiseach Enda Kenny on the economic management council, said last week that the IMF backed the idea but that it could run into political difficulties in Europe.

"All of these are delicate negotiating matters but in terms of countries like Ireland recovering - which would also be an achievement for Europe - I think this is a win-win, a win for Ireland and a win for Europe," Burton said.

"This particular deal would save Ireland 200 million euros a year," said the chartered accountant turned politician.

"In the scheme of things, that may not sound like a lot of money, but in terms of the minute management of the budget, it offers, again, that extra bit of scope."

With the economy improving, Burton's biggest challenge may yet be shoring up the support of her centre-left party with just over 18 months to go until a parliamentary election. It won 7 percent of seats in the local polls, down from the 19 percent that brought it to power three years ago.

"It's a pretty big challenge but the next election, unlike the local and European elections, will be about what kind of government and what kind of economy (voters) envisage." (Reuters)

For more visit: www.businessworld.ie