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Ireland: Noonan rejects calls for €2bn cuts in October budget

Thursday, 19 June 2014   (0 Comments)
Posted by: Author: Arthur Beesley
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Author: Arthur Beesley (Irish Times)

Minister for Finance Michael Noonan has rejected demands from Ireland’s bailout sponsors for a €2 billion package of tax increases and spending cutbacks in the October budget.

The Minister’s stance, backed up yesterday by outgoing Tánaiste Eamon Gilmore, is in direct defiance of the International Monetary Fund, the European Commission and the domestic Fiscal Advisory Council.

Less than two hours after IMF mission chief to Ireland Craig Beaumont told reporters the Government should proceed with a €2 billion retrenchment, Mr Noonan said at the Oireachtas finance committee this would not be required to bring the budget deficit to the EU-mandated target of less than 3 per cent next year.

He also pointed to the possibility of corporate tax reforms in the budget following an OECD review of global tax practices from the commission’s State-aid examination of Apple tax arrangements in Ireland.

"The end-May position would suggest that an adjustment of €2 billion wouldn’t be required to get below the 3 per cent. The policy position is: whatever it takes to get below 3 per cent will be done but we’re not trying to beat that target,” he said.

Exchequer performance

In Washington, Mr Gilmore said a €2 billion package was not required. "The exchequer is performing well. We have seen good figures in the recent exchequer returns.”

However, Mr Beaumont said in a conference call Ireland should maintain deficit reduction targets regardless of whether economic growth came in ahead or behind expectations.

This would mean continuing with the €2 billion adjustment, irrespective of whether tax receipts proved stronger than expected. Any additional revenue, he said, could be used as a "buffer”.

His remarks came days after similar demands for a €2 billion package from the commission and from the Fiscal Advisory Council.

With the crafting of the next budget set to pose a challenge to Fine Gael and Labour in the wake of a big election setback, Mr Noonan said politicians must deploy different judgments from external agencies .

"There’s a different skill set required from a politician managing a government department than if you’re a technical person in the IMF in Washington or in the commission.”

Budget leeway

Mr Noonan said a technical review of Ireland’s economic output could lead to an increase of over 1 per cent of gross domestic product.

He said such a conclusion by the CSO might provide leeway but would not be the main element in reducing the €2 billion target.

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