World reaction to Budget

Wed, Apr 8, 2009, 01:00

The reaction to the Budget from European and US websites was wide ranging, with news organisations throughout the globe reporting on the new measures introduced by the Government.

The story was picked up not only the usual large media organisations such as the BBC and the Independent,but also by papers less familiar to Irish taxpayers, such as Canada's Toronto Star.

The Timesonline carried a short video clip about the emergency budget and what it would mean for Britain's economy. Describing it as a "bust budget", the video said Minister for Finance Brian Lenihan was delivering his second emergency Budget in seventh months, describing it as a grim task for any finance minister.

However, it pointed out that Ireland had some advantages over Britain, with a smaller national debt, and said that markets would now be looking to Britain's fiscal position.

The accompanying article described the measures as a way to address the "runaway" fiscal deficit, with Mr Lenihan predicting a budget deficit 10.75 per cent of gross domestic product (GDP), down from 12.75 per cent.

The BBC website said the Budget was the second in six months to deal with what it described as a "rapidly contracting economy". The article highlighted a large rise in taxes, spending cuts and the formation of an independent agency to take over banks' bad debts in a bid to restore lending. The BBC said the country is dealing with a "deepening recession" and correcting the "worst deficit in Europe". According to BBC economics editor Stephanie Flanders, there is "method to his madness", warning there were lessons for the UK - mainly that as a country gets deeper into debt, fiscal stimulus loses some of its power.

The Financial Timesled with the higher taxes that are to hit "the middle classes" of Ireland, with the establishment of the national asset management agency following close behind.

The same paper carries a second article focusing on the establishment of the government-controlled agency to tackle the banks' bad debts. The plan has already been criticised by the main opposition party as a “big time bomb” for taxpayers, it said. This will make Ireland the first European country to offer to take over the toxic assets of privately owned lenders. It points out that similar proposals elsewhere have been deemed too difficult to value the assets.

The Wall Street Journal's website carried a brief article from the Dow Jones newswire that said the European Commission has reacted positively to efforts to control the growing budget deficit, praising the efforts made. published a similar article from Reuters saying the European Commission viewed the new measures as "decisive action" to contain the rising deficit. It said a preliminary assessment was that "decisive, broad-based action" had been taken in the budget. It also confirmed that the Government had consulted with the Commission before announcing plans to create the agency to deal with impaired assets from banks.

A short piece appeared on the website of the Toronto Star,describing the measures as "hefty hikes in income tax and service spending cuts" in a bid to restore confidence in the "shaky finances of debt-stricken Ireland". It is not yet clear if the Irish taxpayers agree with its assessment of the Budget as a "painstakingly negotiated plan".

The Independenthad a more gloomy take on things, describing the current situation as "the dismal business of adjusting to a generational drop in living standards with the end of the Celtic Tiger boom and the prospect of a new era of austerity".

It said the Budget lived up to fears it would be the toughest in Irish history. The paper drew attention to the cuts in expenses and pensions for TDs, and the loss of five junior ministerial posts. It said the package of cuts and tax hikes was aimed at impressing Irish voters and international opinion, both of which have been less than bowled over by the current Government. It also commented on the "loadsamoney" culture that has developed among many Irish young people, most of whom have never experienced hardship felt in other generations.

A cartoon in the opinion section, meanwhile, shows a caricature of Brian Cowen measuring up an already dead Celtic Tiger, declaring that it has to go on a diet until it is healthy again.