Just how is Ireland going to tackle its financial meltdown? The government’s four-year plan to restore health to its public purse breaks down like this.
A 15-billion euro package will claw back the deficit to below three percent of GDP by 2014, with six billion coming as early as next year. Two-thirds of this will come from cuts in public spending, a third from raised tax revenues.
To cope with this blood-letting the government says the economy is expected to grow on average by 2.75 pecent over the period. In the face of EU opposition it has kept its low corporation tax at 12.5 percent.
The deficit will be cut year-on-year to shrink it from the horror of 2010’s near 12 percent of GDP. The lion’s share is slashed right away with over 2.5 percent vanishing next year, slightly less than two percent the year after, and ending up at 2.8 percent of GDP in 2014. That is the plan, anyway.
The government says 90,000 new jobs over the four years will help ease the pain, and that unemployment will be back below 10 percent by 2014.
Pay cuts trim one euro off the hourly minimum wage, taking it to 7.65 euros. The total public sector pay bill is slashed by 1.2 billion euros. There will be welfare cuts of three billion. The government says this will help restore competitivity and remove barriers to jobs creation.
VAT will also rise to 23 percent by the end of the four-year period, bitter pills indeed for the Celtic Tiger to swallow.