To date 3 deflationary budgets, which have taken €14.5 billion out of the economy, have been approved. The Government says it needs to cut a further €15 billion over the next four years (for a total of €29.5bn which is equivalent to 19% of the country’s GDP), to meet the target of 3% of GDP by 2014. Meanwhile, Ireland is in its third year of recession and unemployment has more than tripled from 4.3% (end of 2006) to 13.9% today.
General information and figures
To date 3 deflationary budgets, which have taken €14.5 billion out of the economy, have been approved. The Government says it needs to cut a further €15 billion over the next four years (for a total of €29.5bn which is equivalent to 19% of the country’s GDP), to meet the target of 3% of GDP by 2014. Meanwhile, Ireland is in its third year of recession and unemployment has more than tripled from 4.3% (end of 2006) to 13.9% today.
Ireland is set to receive a €85bn bail-out from the International Monetary Fund and the European Union. 17.5 billion of this will come from Irish own-resources (12.5 billion from the national pension reserve and 5 billion from cash reserves). The average interest rate for the loans is a colossal 5.83% (even higher than Greece).
Unemployment rate (June 2010): 13.7%
GDP (bn euro – 2010) : 155.49
General Government debt (2009 - % GDP): 65.5
Public deficit (2009 - % GDP) : 14,4
Source: Eurostat
Public Employees
Public employees have had both a pension levy and a pay cut imposed. Total loss of pay ranges from 5-15% depending on pay scales. A recruitment embargo is also in place. However unions have done a deal on public service reform and pay cuts which guarantees no further cuts for the next 4 years when the deal will be reviewed.
Public service pensions above €12,000 per year will be reduced by an average of 4%.
25,000 jobs will be cut (equivalent to 10% of the government workforce).
Public sector workers’ pay will be capped at 250,000 euro.
Civil servants on temporary contracts will not have their contracts renewed and there are also plans for voluntary redundancies.
Cuts in social benefits
Child benefit is decreased by €10 per child per month and by additional €10 from the third child.
4% cut in social welfare payments to the unemployed: an €8 per week cut in working age welfare payments; an €8 per week fall in the maximum and minimum rates of maternity benefit and a €2 increase in the amount tenants on rent supplement schemes pay towards their accommodation. For individuals aged between 22 and 24 years, there will be a reduction of €6 per week in the rate of Jobseeker’s Allowance and Supplementary Welfare Allowance.
Pension reforms
Proposal to increase the pension age to 66 in 2014, to 67 in 2021 and to 68 in 2028.
Cuts in public services, transfers and public investments
Education fees will be increased.
Annual salary of the Prime minister is decreased by €14,000 per year; other ministers have their yearly pay cut by €10,000.
The health and childcare budget is to be cut by €746m.
The amount of funds given by central government to local authorities is reduced.
Collective bargaining and labour reform
Minimum wage is reduced from €8.65 per hour to €7.65 per hour (a reduction of 11,6%).
Tax changes
VAT for goods and services will be increased from 21% to 23%.
A new tax on water consumption will be introduced.
Corporate tax of 12.5% (one of lowest in Europe) will not be increased. The three-year corporation tax exemption is also maintained.
The amount Irish workers can earn before paying tax has been reduced to €4,004. Workers will now pay 2% income tax to €10,036, 4% from €10,036 to €16,016 and 7% above this level.
Abolition and restriction of a number of tax reliefs are supposed to yield some €150m extra next year.
Price of oil is increased by 4c and diesel by 2c.
A new flat tax of 1% on all residential property transactions up to €1m and 2% on amounts above a €1m is introduced.