Irish Must Struggle With Austerity Budget 2010-2011. Gov. Jobs, Social Programs, Tax Reform Targets

Posted on December 7, 2010


The first distribution of bailout funds from the EU and the IMF will reach Ireland when agreed upon cuts in Irish government spending and new sources of revenue are codified in a draconian budget that is expected to pass.  It is the toughest budget in Irish history.

In the US, a similar scenario (see more about proposed Irish budget below) may have to be the endgame sooner rather than later.  Ireland’s government personnel reduction measures may, in part, be a road map for what may have to happen in our Federal government thereby ending decades of security in these kinds of jobs.

Raising taxes to punishing levels has long been a UK method of raising funds. Wealthy individuals and companies have left England for this reason. In the US, we anticipate a 2-year reprieve from this.

For a long time, Ireland was THE place for international pharmaceutical companies to locate:

Ireland is home to eight out of the top 10 pharmaceutical companies in the world and the relationship between the US pharmaceutical industry and Ireland is based on a history of successful investment and Ireland’s ability to meet the needs of US multi-nationals establishing operations in Europe. There are approximately 90 blockbuster drugs on the market; that is, drugs achieving sales of over $1 billion per annum. Today the top 10 blockbuster drugs account for around 10 percent of total industry revenue. Of these top 10 drugs, six are manufactured in Ireland. [IDA Ireland]

It remains to be seen if these and other companies may relocate after investing heavily in state of the art facilities.  If the cost of manufacture going up in Ireland, you can count on higher prices at the drugstore.

Meanwhile, in Ireland civil unrest has already begun in anticipation of this budget. As in the days of the potato famine  many Irish may wish to leave but where to go?  Things are not good elsewhere and are trending downward.  The US is no longer the release valve for Europe’s “huddled masses” and millionaires.

The situation in Ireland:

The Irish Republic’s generous welfare budget is a prime target for the axe.

Child benefit is being slashed, and social welfare spending – state pensions excluded – is being cut by 5%.

Thousands of public sector jobs will go. Civil service pay freezes will be imposed, and reform of the tax system will bring thousands of Irish people into the tax net. The minimum wage will be lowered.

Dublin is a very cold place these days and the mood of the people matches the weather.Politicians from the ruling Fianna Fail coalition usually enjoy a friendly and gregarious relationship with voters on all sides but that is no longer the case. 

Voters are champing at the bit to get to the ballot box and punish this government.

That urge will intensify later when even further swingeing cuts are announced in the budget for 2011 including a de facto rise in income tax by dramatically widening the tax net as well as significant cuts in social welfare.

That the populace must endure this hardship so that failed Irish banks can be propped up is likely to live long in memories.

Mr Cowen says the cuts are necessary because the Irish Republic was living way beyond its means. [BBCContinue reading the main story]

Analysis

image of Joe Lynam Joe Lynam BBC News, Dublin 


Dublin is a very cold place these days and the mood of the people matches the weather.

Politicians from the ruling Fianna Fail coalition usually enjoy a friendly and gregarious relationship with voters on all sides but that is no longer the case.

Voters are champing at the bit to get to the ballot box and punish this government.

That urge will intensify later when even further swingeing cuts are announced in the budget for 2011 including a de facto rise in income tax by dramatically widening the tax net as well as significant cuts in social welfare.

That the populace must endure this hardship so that failed Irish banks can be propped up is likely to live long in memories.

Posted in: IRELAND