| DUBLIN, April 28
DUBLIN, April 28 Readers of Ireland's
largest-selling daily newspaper were confronted by an unexpected
front page headline this week when the Irish Independent
proclaimed the 'End Of Austerity'.
In a country that began cutting spending and hiking taxes
almost five years ago, well before the scale of the euro zone's
debt crisis was evident, weary Irish voters have more interest
than most in the fresh debate over Europe's cornerstone policy.
But as European Commission President Jose Manuel Barroso put
the austerity question back on the agenda by suggesting it had
reached its natural limit of popular support, data showed that
in Europe, only Greece has a higher underlying budget deficit.
While better than was assumed under its EU/IMF bailout,
Ireland's deficit of 7.6 percent of annual output nevertheless
points to more tough budgets and soul searching in Brussels may
simply make it harder for politicians to push cuts through.
"It's a dangerous game," said Donal Sheridan, a university
lecturer, after reading the Independent's eye-catching headline
at a newsstand on Dublin's main thoroughfare, O'Connell Street.
"If you're going to do something significant, fair enough,
give people the indication so they can look forward to it. But
if you're not, you're just building up expectations and people
will be even more disappointed when the budget comes."
Barroso's comments, echoed by the IMF but resisted by the
European Central Bank, come at a tricky time for the Irish
government as it tries to revive a failed plan to cut public pay
while keeping the kind of industrial peace that has marked it
apart from other euro zone strugglers.
The deal, aimed at saving 1 billion euros between now and
2015, was rejected by public servants last week and trade union
leaders have been emboldened by the increasing calls to throttle
back on debt-cutting drives.
The government's usual reaction -- blaming the demands of
its international lenders, the European Commission, the
International Monetary Fund the European Central Bank -- has
suddenly become less convincing.
"EUROPE RUNNING HEADLESS"
It is not just in Dublin that political will is set to be
tested in the coming months. In Madrid, Prime Minister Mariano
Rajoy laid out a package of reforms on Friday that he hopes will
win him some breathing space from Europe.
Yet to trim a deficit almost as large as Ireland's, he must
make temporary tax hikes and wage cuts permanent, finish a
long-overdue reform of the public pension system and oversee a
total overhaul of public administration.
Each will be a tough political ask on their own when more
than one in four Spaniards are unable to find work.
In Portugal too, wider calls for a row back on austerity
come with Lisbon under more pressure than at any point in its
two-year bailout to rush through spending cuts and cut a deficit
that rose sharply to 6.4 percent of GDP last year.
Just last week, the government approved new cuts to put the
budget agreed with the European Union and International Monetary
Fund back on track after the country's constitutional court
rejected parts of this year's plan.
Unsurprisingly, Portuguese media have taken the change in EU
rhetoric, as well as recent pro-growth proposals introduced by
the government, with a pinch of salt.
"The worst thing about Barroso's statements is that it is
not the first time that he says one thing today and another
thing tomorrow," political commentator Camilo Lourenco wrote in
business newspaper Jornal de Negocios on Tuesday in an opinion
piece titled 'Barroso and Europe Running Headless'
While Spain, like Portugal, is expected be given longer to
meet its deficit-cutting goals and Ireland is already talking
about investing the money left over from beating its targets,
this will likely be the limit of any change of tack.
"There is a risk that the tone of the current conversation
suggests austerity is an option when in reality there is further
adjustment to come," said Austin Hughes, economist at KBC Bank
and author of Ireland's monthly consumer price index commentary.