Govt to lay groundwork for bailout

The Government will today begin laying the groundwork for a multibillion bailout from the International Monetary Fund (IMF) and Europe.

Delicate negotiations on the shape and scale of the loans will run for several weeks.

Under the bailout scheme, income tax will increase but the 12.5% corporation tax, which the Government dubbed a red-line deal-breaker if forced into negotiations, will not be touched.

Little other detail has been revealed by the Government, with Taoiseach Brian Cowen and Finance Minister Brian Lenihan reluctant to name their price.

They also refused to be drawn on debt levels the country is facing, how long loans will run for or if money will be drawn down by banks for certain.

Ireland’s State running costs are €19bn in the red.

But the deepening crisis has been in the banks, with about €23bn of deposits shifted out of Ireland this year and prohibitive borrowing rates on the international markets.

An asset sell-off in the banks may also be looked at under the terms of the deal, Mr Lenihan added.

The plan has the backing of the IMF, the EU, G7 countries and Britain and Sweden, who are lining up bilateral aid.

In the meantime, the Government will push ahead with the publication of its Budget roadmap to recovery early this week with headline figures on €15bn savings to be unveiled.

Department of Finance number-crunchers are also analysing the finer details of Budget 2011, due on December 7.

Mr Lenihan said the €8.65 minimum wage, the second highest in Europe, will have to be looked at. Social welfare cuts and new taxes are also on the cards.

On top of that, the Government is staring down the barrel of by-election defeat in the once staunch heartland of the ruling Fianna Fáil party this Thursday.

The coalition with the Greens is already operating a razor-thin majority and, with victory in Donegal South-West unlikely, a loss would leave the balance of power resting on just two seats.