By Agency Reporter

Wednesday, 8 Dec 2010

Irish Finance Minister Brian Lenihan said further cuts in social welfare spending are ”unavoidable,” as he published a 6bn-euro ($8bn) budget plan to halt a slide in investor confidence that forced the country into a bailout, Bloomberg reported on Tuesday.

Lawmakers will begin voting on the measures in parliament from about 7p.m, on Tuesday, Prime Minister Brian Cowen has the support of 82 lawmakers in the parliament compared with 80 for the opposition, including independents.

”This has been a traumatic and worrying time for our citizens,” Lenihan said in parliament in Dublin today as he announced spending cuts ranging from child benefits to public sector pensions and government salaries. Ireland needs external support ”to break the vicious cycle that has threatened our national finances and our banking system since the second quarter of the year.”

The government is under pressure to pass the budget to secure the 85bn-euro aid package as spending cuts threaten to prolong a slump that has seen the economy shrink 11 per cent over the past three years. While investors remain concerned about contagion and governments‘ ability to push down deficits, European finance ministers late yesterday ruled out immediate financial support to Portugal and Spain.

The budget is the fourth since October 2008 and adds to measures of about 14bn euros as the government seeks to reduce the country‘s deficit.

Ireland agreed on the aid package with the European Union and the International Monetary Fund on November 28 after its borrowing costs soared on investor concern the cost of rescuing lenders including Anglo Irish Bank Corporation would swamp the state. About 35 billion euros of the aid is earmarked for the country‘s banks, with the remainder for the state.

”Even in this most complex crisis, there are clear signs of hope,” Lenihan said. ”It‘s very easy to lose sight of the fact that economic activity has stabilised.”

Irish bonds have risen in the past week, narrowing the extra yield investors demand to hold Irish 10-year bonds over German bunds, Europe‘s benchmark, to 510 basis points from a euro-era record 680 basis points on November 30. That‘s still almost 10 times its average over the last decade.

 

Source: Punch