Ireland’s cabinet is due to hold a crucial meeting to finalise a four-year plan to cut the budget deficit.
The emergency meeting, scheduled for Sunday, is essential to get a bail-out from Europe. An agreement on the austerity plan could unlock ongoing negotiations in Dublin with the European Union, the European Central Bank and the International Monetary Fund on a bail-out for the Irish economy.
The bail-out package could be worth 40-100bn euros. The money could be used by the Irish government to prop up the country’s banks, whose debt levels have triggered fears of a repeat of the Greek crisis.
Brian Cowen, the Irish prime minister, has outlined budget plans to cut more than $20bn over the next four years.
The cabinet is expected to finalise the new budget measures, which should be announced by Tuesday.
Cowen was quoted by state broadcaster RTE as saying on Saturday that the four-year plan was “very well advanced” and that its “parameters” had already won the approval of Olli Rehn, the European economic and monetary affairs commissioner.
Brendan Smith, the agriculture minister, said intense work had been ongoing concerning the austerity plan.
“Over the last week or so relevant officials from the department [of finance] and from the relevant state agencies have been involved in technical discussions with representatives from EU organisations,” he said.
“Those discussions are ongoing. My understanding is that those discussions are going fine.”
Fragile financial sector
Banks in Ireland have borrowed more than $170bn from the European Central bank till the end of October. The government has injected 50bn euros ($68.4bn) into these banks, pushing its public deficit to 32 per cent of output – more than 10 times the EU limit.
Ireland’s financial sector is still fragile despite the recapitalisation.
The international team currently in Dublin is subjecting Ireland’s books to forensic analysis, looking at the reasons for the collapse of the one-time Celtic Tiger economy.
Commenting on the Irish bail-out negotiations, Robin Hahnel, an economist and political activist, told Al Jazeera that “Europe is armtwisting its weaker economies and this will not solve the crisis in Ireland”.
“What’s happening in Ireland is exactly what has already happened in Greece and Spain. The European Union is forcing the weaker countries, which are part of the euro zone, to engage in really draconian fiscal austerity,” Hahnel said.
“This is going to do nothing but aggravate the recessionary pressures within those economies and … increase their rates of unemployment. Production is going to drop further, income will drop and that means tax revenues are going to drop.
“This is not going to solve the problem. It will create a tremendous amount of pain – really unnecessary pain for the Irish population.”