Cabinet meets to discuss budget


The Cabinet is today holding further discussions on the upcoming budget and four-year economic strategy that aims to tackle the States budgetary difficulties.

The Minister for Finance, Brian Lenihan, last week said the Government would be seeking to reduce the deficit next year by €6 billion through spending cuts and tax increases.

The €6 billion in cuts are part of the Government's plan to bring the deficit in line with EU targets by 2014, but it is double the amount Mr Lenihan signalled in last year's budget.

Fine Gael leader Enda Kenny said today his party will not back next month's budget, further limiting the shaky coalition's chances of getting harsh austerity cuts past a slim Dáil majority.

"No, I'm not and I'll tell you why. I have no faith in this Government," Mr Kenny told RTÉ when asked whether he would vote in favour of the budget.

"This Government have no credibility left and somebody needs a new mandate. If the Government are as confident as they say they are about their budget, then they could have an election before then."

Unlike Labour, however, Mr Kenny said he broadly agreed with next year's €6 billion figure and the four-year aimed adjustment of €15 billion and that Fine Gael would look to rely on spending cuts rather than tax increases to slim Ireland's budget deficit.

The European Commission has backed the Government's outline economic plan published by the Government this week, but is set to seek further economic reform. Markets remain unconvinced about the plan, with the interest rate on Government bonds remaining close to record highs.

Olli Rehn, European commissioner for economic affairs, will press for measures to improve competition when he travels to Dublin to meet Minister for Finance, Brian Lenihan, tomorrow. Demands that Ireland increase its corporation tax rate are not expected to figure in the talks.

The commissioner wants to discuss all aspects of Ireland’s four-year economic plan in detail, said a spokesman. “It’s very important that this consolidation effort will be backed also by a structural reform.”

The Government measures are aimed at reducing annual borrowing to 3 per cent of gross domestic product – the monetary value of all economic activity – by 2014.

This is the target set under the rules of the European single currency and is seen as a sustainable level of borrowing by the European Commission.

The total adjustment of €15 billion over four years is double the €7.5 billion adjustment that the Minister for Finance predicted last year would be needed to hit the 3 per cent target.