Commission may ask for more cuts

MINISTER FOR Finance Brian Lenihan will learn next week whether the EU Commission wants him to intensify the €3 billion austerity package he plans next year as it tries to strengthen the euro zone in the face of the sovereign debt emergency.

Even as Spain and the commission each denied a German newspaper report that the EU was preparing to activate the EU/IMF rescue plan if Madrid asked for it, certain high-level officials in Brussels said there was anxiety that the country would ultimately have to tap the fund.

Economics commissioner Olli Rehn is preparing to hand down judgement in Strasbourg next Tuesday on whether a batch of single currency members should accelerate measures to bring their budget deficits to heel.

An informed source indicated that Mr Rehn was unlikely to ask Mr Lenihan to add to the €4 billion austerity plan that is in place this year. The source added, however, that the commission was examining whether to call on the Minister to go further than the €3 billion package he already plans to introduce in the 2011 budget.

The source would not say if Mr Rehn wanted more cutbacks from Dublin next year. At the very least, however, the commissioner is expected to call specific details as to policy measures Mr Lenihan plans to achieve the €3 billion target already set.

With the 16 euro governments under mounting pressure to find a way out of the sovereign debt crisis sparked by Greece’s brush with insolvency, Mr Rehn has taken a very firm line on the need for member states to accelerate efforts to correct their budgets.

Figures this week which showed that the Finnish economy slipped back into an unexpected recession in January-March have caused alarm in Brussels as they raised the prospect of a double-dip recession within the euro zone.

Although Finnish economists said April trade data released showed a return to growth might not be far away, the European authorities are fearful of anything that would threaten what is a fragile recovery process in the single currency economic area.

The Spanish economy ministry said yesterday it had not sought rescue aid from the EU, after the Financial Times Deutschland said the EU was preparing to activate a package in case Madrid asked for it.

Mr Rehn’s spokesman said: “We are not preparing anything, it is speculation.”