Kenny flatly rejects Germany Budget claims

The Taoiseach Enda Kenny has flatly rejected reports that Germany has been allowed to inspect plans to save €3.8bn in the Budget.

A day after talks with Chancellor Angela Merkel, the Government was accused of a staggering breach of faith amid embarrassing claims that the parliament in Berlin was sifting through draft plans for tax hikes here.

Opposition politicians rounded on the Taoiseach, with Sinn Féin suggesting the German Chancellor was pulling the strings.

Asked how the document ended up in the Bundestag, Mr Kenny said: “I have no idea.”

Reuters news agency reported seeing a document presented to the German parliament’s budget committee yesterday which showed the Budget plans, including a 2% increase in the top VAT rate to 23% to generate €670m.

It is understood papers were dated November 2011 but not signed by Finance Minister Michael Noonan.

Mr Kenny, at his first official meeting with the North's First and Deputy First ministers Peter Robinson and Martin McGuinness in Belfast, could not explain how or why the lower house of the German parliament was examining Ireland‘s budget options.

“Let me confirm something to you, the Cabinet have made no decision in regard to the Budget. It is on December 6,” he said.

“It is only after the Cabinet make decisions that these things become a reality. I‘m not going to comment on speculative (reports) – or comment about decisions that have not been taken by the Government at all.”

Much of the plans for €2.2bn in spending cuts and €1.6bn extra in tax have already been floated publicly, such as the VAT rise and €700m savings from social welfare.

But a Government spokesman insisted the disclosure from overseas had nothing to do with the Taoiseach’s meeting with the Chancellor.

Irish officials have also been demanding answers from the European Commission over the embarrassing leak amid fears that the draft document may have originated from communications and discussions between Dublin and Brussels.

“We are trying to get the bottom of it but our concerns have been expressed to the Commission,” a spokesman said.

Michael McGrath, finance spokesman with Fianna Fáil, called on Mr Noonan to make a statement to the Dáil on the reported leaks.

“If this proves to be true, it would be a staggering and unprecedented breach of faith with the Irish people on budget plans,” he said.

“It would represent a fundamental breach of established protocols in relation to the disclosure of budgetary measures.”

Sinn Féin finance spokesman Pearse Doherty accused the Taoiseach of undermining the Dáil and said if the reports were true Chancellor Merkel is pulling the strings.

“The increase in the VAT has already been outlined in the Memorandum of Understanding. However, having it discussed by a German budget committee undermines the Dáil,” Mr Doherty said.

“Enda Kenny needs to come into the Dáil and give a report on his meeting with Angela Merkel, including exactly what details and documents he gave to his German counterpart.”

It is understood that officials in Dublin believe the German parliamentary budget committee may have been examining plans on the back of increased powers the Bundestag was given by a Constitutional Court in September to decide on eurozone bailouts.

The Department of Finance could not explain why the document appeared to have been written by Irish officials.

The papers said: “After successive budgets in which income tax burdens were raised significantly, we have decided to focus on indirect tax increases to deliver the bulk of the €1bn additional tax effort required in 2012.”

The huge austerity measures, for a third year in a row, are part of the strict fiscal regime following the €85bn bailout loan financed by Europe and the International Monetary Fund (IMF).

The VAT increase had been signalled in a Memorandum of Understanding, with the Government committed to have the reforms in place early next year.

The Government is to present a draft budget for 2012 under the terms of the bailout.

The deal also says that Ireland will lower personal income tax bands and credits and private pension tax relief. There will also be reform of capital gains tax and acquisitions tax.

Radical reform of the social welfare system has also been suggested, including the possibility of employers paying the first four weeks of sick pay combined with efficiency and modernising schemes.

The aim is for the Department of Social Protection to save €700m next year and €2bn by the end of 2014 out of a €21bn budget. The Government has committed itself to not cutting the main rates of social welfare.

The Dublin Chamber of Commerce said it was highly concerned about the impact a VAT increase will have on consumer confidence and a highly depressed domestic market.