Deal binding no matter who is in power, warns EC
An early general election will not make any difference to the EU-IMF programme, Economics Commissioner Olli Rehn said, as negotiations will be concluded next week.
But the budget will set in train some of its actions, cutting €6 billion off the deficit for 2011, and as such, passing it was essential, Mr Rehn has warned.
There should be no delay in getting the budget through on December 7 as planned. Every day that passes adds to Ireland’s problems, he told 11 of Ireland’s MEPs yesterday.
In an apparent appeal for greater emphasis on increasing taxes rather than cutting social spending, he said that just as there is solidarity within Europe for Ireland, there should be solidarity within Ireland towards people who are vulnerable and on low incomes.
The commission is anxious to reduce the risk of civil unrest, such as that seen in Greece, or political upheaval that would encourage some politicians to refuse to abide by measures.
The IMF on the other hand, in a paper published yesterday by their lead negotiator in Dublin, Ajai Chopra, is arguing for the minimum wage and unemployment payments to be cut.
The contract, officially known as the memorandum of understanding (MoU), between Ireland and those providing loans of around €90 billion over three years, will contain detailed steps to restructure the banks and specific targets and actions to cut the budget deficit to 3% of GDP by 2014.
It is expected to be finalised no later than the end of the month and after being approved by the Government will go to the EU Finance Ministers to be signed off.
It will be signed by the Minister for Finance and the governor of the Irish Central Bank and will be a legal document binding the Irish state, unlike the four-year budget programme being published today by the Government.
Progress on meeting targets will be reviewed most likely every three months by the European Commission and the IMF and tranches of money will only be paid out provided the work is progressing as planned.
However the sum to be cut off the state’s deficit — currently set at €15 billion is not fixed and can be adjusted annually.
This figure could be increased if receipts are down or cuts have not been sufficient. On the other hand the cuts in state spending could be less, if for instance growth produces better than expected results.
The MEPs, when they met Mr Rehn in the European Parliament, stressed the need to keep the corporation tax rate at 12.5%.
Labour MEP Alan Kelly said: “I hope the commissioner will help put an end to the sounds coming from other countries on our corporation tax. It is not helpful, there is no legal mechanism to force it on us and increasing it at this stage would be extremely counter-productive if we want to ever pay back the EU-IMF.”
The four Fine Gael MEPs, Gay Mitchell, Seán Kelly, Jim Higgins and Máiread McGuinness said the commissioner agreed this was not the time to raise the corporation tax issue.
