* Austerity budget billed as toughest of five-year term
* Economists warn euro crisis means worse may be ahead
* PM addresses nation to warn of pain ahead
By Conor Humphries
DUBLIN, Dec 5 Ireland's government on
Monday unveils what it hopes will be the toughest budget of its
five-year term, but as it tries to keep the public onside
economists are warning that a global downturn means the worst
may be yet to come.
Prime Minister Enda Kenny, who came to power in February,
has pledged to get Ireland's budget deficit, currently the worst
in the industrialised world, under an EU limit of three percent
of GDP by 2015 from an estimated 10 percent.
He has said this budget will be the toughest of a four-year
run of belt-tightening and the narrative that the worst is
nearly over has helped secure social harmony in Ireland, which
unlike Greece has seen very little protest.
But with Europe in danger of tipping back into recession,
Kenny may be forced to push through even harsher budgets in 2013
and beyond if Ireland's trade-dependent economy fails to produce
sufficient revenues to meet its EU-IMF goals.
Growing concern about the economy prompted Kenny on Sunday
night to make a televised address to the nation, the first by a
prime minister since 1986, to warn of tough times ahead.
"I would love to tell you tonight that our economic problems
are solved, that the worst is over," Kenny said, flanked by
Irish and European Union flags. "But for far too many of you,
that is simply not the truth."
Ireland already raised its adjustment target for 2012 to 3.8
billion euros from 3.6 billion euros due to weaker growth, with
nearly 60 percent of the adjustment coming from spending cuts.
The government has peniclled in a 2013-2015 fiscal
adjustment of 8.6 billion euros as it bids to assure investors
it can exit its 85 billion euro EU-IMF bailout in 2013.
It says it expects to hit its 2011 deficit target after
spending less money than planned. But a tax shortfall, which
doubled in November to 1.6 percent caused economists to warn
long-term projections may be too optimistic.
A Reuters poll last week showed that economists expect
Ireland to miss its medium-term fiscal goals due to the threat
of a recession in Europe.
Ireland's coalition government has a record majority and is
expected to comfortably pass the 2012 budget but backbenchers,
particularly from the centre-left Labour party, are
uncomfortable about breaking election pledges.
Two Labour lawmakers have already been expelled from the
parliamentary party in opposition to its economic policies and
heaping more austerity on voters would raise the stakes.
In a break with tradition, the 2012 budget will be unveiled
over two days instead of one with spending measures to be
presented by the Minister for Expenditure and Public Sector
Reform Brendan Howlin on Monday and tax plans to be unveiled by
Minister for Finance Michael Noonan on Tuesday.
Much of the detail, however, is already known after Reuters
obtained details of the budget in documents given to German
While Kenny said he would not to raise income taxes in 2012,
his government will increase the top rate of sales tax by two
percentage points to raise 670 million euros. He is also
planning on introducing a property tax and raising motor taxes
and carbon taxes. Capital gains taxes will also be targeted.
Social welfare rates will not be cut but eligibility for
public handouts is likely to be tightened. Caps on recruitment
will cut the public sector wage bill and the budgets for
education and health are likely to be hit.