Ireland with Severe Austerity Measures, Ups Taxes
World | November 24, 2010, Wednesday // 20:23| viewsIreland's PM Brian Cowen. Photo by EPA/BGNES
Ireland's government has announced the most brutal austerity measures in its history to take effect over the next 4 years.
Irish Prime Minister Brian Cowen announced the measures, which are expected to have the effect of EUR 15 B by 2015, at a moment when his government is negotiating an EUR 85 B aid package with the EU and the IMF.
The 130-page austerity plan provides for reducing state spending by EUR 10 B and for raising EUR 5 B from tax hikes in the next four years. EUR 6 B of spending, or 40%, is supposed to be saved in 2011.
For the four-year period, Ireland will save EUR 3.8 B from welfare cuts, and will raise EUR 1.9 B by increasing the income tax. The steps are designed to bring its budget deficit below 3% of the GDP by the end of 2014, as required by the Stability and Growth Pact of the EU.
Ireland will keep its corporate tax at the low level of 12.5% despite pressure by France and Germany, which demand its increase. Its VAT, however, will be raised gradually from 21% to 24%.
Including Ireland's banking rescue, the country's budget deficit expected to reach 32% in 2010, which is a record in contemporary Europe.
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