Noonan tests patience of the Irish public with another austerity budget

Budget Day In Dublin - There Were More Journal...


Laying out measures so Ireland can stick with its promise to the International Monetary Fund and European funders of its 2010 bailout to cut the shortfall to 7.5 percent of gross domestic product next year. From midnight tonight, a bottle of wine will go up by 1 euro ($1.30), while a new property tax will come into effect in July 2013.

“We will not dither or procrastinate, but will drive forward to lead this country out of the despair and despondency and lack of self-worth in which we found ourselves in March 2011,” Noonan told lawmakers in parliament in Dublin today, referring to the month when the government took power.

Ireland is about 75 percent through cuts amounting to 33.4 billion euros, or about a fifth of the size of the economy, stretched over eight years through 2015. While the deficit will still be the highest in the 27-member EU for the fourth year in a row in 2013, the austerity has been lauded by investors.

The National Treasury Management Agency plans to raise about 10 billion euros in the market next year as it returns to syndicated bond sales and regular monthly long-term debt auctions, its chief executive officer, John Corrigan, said on Nov. 22. Ireland sold Treasury bills and bonds in July for the first time in almost two years.

The new measures come on top of 25 billion euros taken out of the economy since 2008 – equivalent to 15 percent of annual output – although the rapid rate of services growth last month showed its ability to weather the cuts as well as the Euro zone downturn.

Taxing Property

Ireland will introduce a property tax from July, levied at an annual 0.18 percent for homes valued below 1 million euros, rising to 0.25 percent above that threshold, Noonan said.

He will exempt new homes bought up to the end of 2016 from the tax and will introduce legislation on real-estate investment trusts, or REITs, to help boost the property market, whose collapse triggered Ireland’s economic demise.

Ireland is establishing the trusts to lure investors into the commercial property market, Noonan said. Their introduction will assist the National Asset Management Agency as it sells property. The agency was set up by the previous government to take on bad bank debt as it propped up the financial industry.

“The property measures are also designed to create additional jobs in the property and construction sectors,” Noonan said today. Home prices, down 50 percent from their 2007 peak, have risen in three of the past four months, according to the Central Statistics Office in Dublin.

Mortgage Debt

At the same time, the government plans to tackle the levels of debt, a lot of which stems from the property market. The central bank is overseeing the rollout of solutions to deal with “unsustainable personal and commercial debt,” he said.

Allied Irish Banks Plc, the largest mortgage lender, has pledged to contact 1,500 customers a month to work on restructuring their home loans, he said.

“This is the level of ambition that the government expects from all banks,” he said. “The Irish financial crisis could be summarized in one word: debt. The government is committed to dealing with both.”

Noonan repeated his pledge to keep corporation tax which is levied on company profits at a eurozone low of 12.5 percent, despite international pressure to raise it.


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