Ireland: No deal with opposition on budget cuts

AP News
Posted: Oct 20, 2010 3:47 PM
Ireland: No deal with opposition on budget cuts

Prime Minister Brian Cowen failed Wednesday to persuade Ireland's major opposition leaders to support his plans for reining in a runaway budget deficit over the next four years.

Cowen spoke after a 2-hour meeting with Fine Gael leader Enda Kenny and Labour Party leader Eamon Gilmore, both of whom contend Cowen has no right to set Ireland's spending and taxation policies for the next four years.

Polls indicate voters want to replace Cowen's long-governing Fianna Fail party with a Fine Gael-Labour coalition.

But Cowen's full term doesn't expire until mid-2012, and the prime minister said he wouldn't call an early election in advance of publishing his government's budget-slashing plan.

"We have an immediate situation here," Cowen told Irish state broadcasters RTE. "We have to bring forward a four-year plan by mid-November. I believe an election, with all of the various manifestos out there, would sow more confusion than clarity."

In separate statements, Cowen and Kenny said they do agree that Ireland must slash its deficit to 3 percent of GDP by 2014. Gilmore, whose left-of-center party is at record highs in the polls, declined immediate comment.

Cowen said Ireland's program of tax hikes and spending cuts _ begun in 2008 after a long-roaring property market began to implode _ "will now have to be accelerated." But he refused to comment on Irish media reports that the cuts over the next four years would amount to euro15 billion, double the government's original estimate.

This year the Irish deficit is forecast to reach 32 percent, a modern European record, because of exceptional costs from a euro45 billion ($62 billion) bailout of five Irish banks. It is projected to fall to around 10 percent in 2011.

Some economists warn that Ireland's recession-ravaged economy cannot cope with more rounds of austerity unless the government somehow can stimulate weak consumer spending at the same time.

"The country needs a recovery plan, not just an austerity plan, and that recovery plan must include a stimulus and growth package focused on job creation and fundamental reform of the way government operates," Kenny said after the meeting.

Cowen said Ireland's top priority must be to reassure international investors that Ireland has a credible plan for restoring its finances and won't have to use an emergency EU-IMF fund for euro-zone countries facing loan defaults. So far only Greece has tapped the fund.