Ireland with Severe Austerity Measures, Ups Taxes

World | November 24, 2010, Wednesday // 20:23|  views

Ireland'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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Tags: ireland, austerity measures, taxes, Brian Cowen, budget deficit, EU, IMF, corporate tax

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