EU wants spending cuts and tax hikes outlined

THE EU wants the Government to spell out in November the spending cuts and tax increases it will make over the next four years to reduce the massive 32% budget deficit caused by the bank bailout.

Belgian finance minister Didier Reynders said the IMF was keeping a close eye on the situation, while Economic Affairs Commissioner Olli Rehn said they were working closely with the IMF but there was no plan to send a joint EU-IMF mission to Dublin.

But the European Commission and the European Central Bank are looking for the same kind of comprehensive, step-by-step measures that Greece had to sign up to in exchange for its EU-IMF bailout.

As a result, the Department of Finance must prepare four years of budgets over the next two months, setting out exactly how and where the money will be raised and how much will be spent.

Finance Minister Brian Lenihan yesterday morning spent 30 minutes on speakerphone explaining the steps he is taking to resolve the banking crisis to eurozone finance ministers, the president of the European Central Bank and the Economics Commissioner.

Afterwards Mr Rehn, ECB president Jean-Claude Trichet, eurozone president Jean-Claude Juncker and the head of the EU-IMF €750 billion bailout fund, Klaus Regling, all expressed confidence in Ireland being able to manage the difficulties ahead.

But all emphasised that the Government has to submit a multi-annual strategy which Mr Rehn insisted must be a comprehensive document with “concrete measures, line by line, sector by sector” detail on where the Government will get the money to reduce the country’s deficit to 3% of GDP by 2014.

The importance of this multi-annual strategy was underlined time and again not just by the commissioner but also by the president of the ECB, Mr Trichet, whose funds are helping to keep the country afloat.

Mr Rehn said they were working very closely with the Irish authorities and the ECB to help them design the programmes of fiscal adjustment.