* Irish PM promises deal will cut future austerity by 20 pct
* Govt will face some calls to use extra cash as a buffer
* Fin min already under party pressure to ease cuts
By Padraic Halpin
DUBLIN, Feb 8 Ireland promised austerity-weary
voters that a bank debt deal struck this week will soften future
budget cuts but its improved fiscal sums still rely on the
European outlook improving, a risk that could yet trip the
Irish Prime Minister Enda Kenny hailed the long-awaited deal
with the European Central Bank to ease the country's debt
burden, which sent borrowing costs down to pre-crisis levels.
as an "historic step" on the economy's road to
It also puts Dublin on course to exit an EU/IMF bailout this
year and both Kenny and finance minister Michael Noonan pledged
that voters would see the benefits through a 20 percent cut to
the 5.1 billion euros in austerity still needed by 2015.
Others, including perhaps the European Commission, may
rather Ireland ferret away the extra 1 billion euros to guard
against nasty economic shocks but Noonan was already coming
under pressure from backbenchers 24 hours after the deal was
"It will have to manifest itself in the budget otherwise
it's just talk," Michael Conaghan of the junior coalition Labour
party, who said the mood in his hard-hit, inner-city Dublin
constituency had lifted, told Reuters.
"I think we need to see some tangible, practical benefits in
the budget that ordinary people can see in their own lives, that
is their expectation. Certainly we backbenchers will be trying
to ensure that this happens.
"Simply to hold it all back in case there's another rainy
day and I'm sure there'll be a rainy day ... We have to lift
some of the rain that fell on us for the last six or seven
With unemployment stuck above 14 percent for the past 2-1/2
years and one in six mortgage holders unable to fully meet
repayments, relief to a relentless austerity drive that began
six years ago would help the struggling domestic economy.
But officials in Noonan's own department cautioned that the
leeway Thursday's deal provides is just one variable feeding
into the budget, highlighting this year's tax take, the ability
to curb spending and events abroad as being among the others.
After Dublin beat last year's deficit target of 8.6 percent
of annual output, still among the highest in Europe, the
country's central bank warned that it should not ease up its
planned fiscal adjustment effort.
That is because weaker external demand will continue to hit
the export-led economy this year, it said, and although Ireland
has avoided joining much of the euro zone in recession, the
bloc's debt crisis has forced it to consistently scale back
To reduce its budget deficit to the EU-required level of 3
percent by 2015, Dublin needs economic growth to jump to 2.5
percent next year from an estimated 0.9 percent in 2012.
A member of the Irish Fiscal Advisory Council, the country's
independent fiscal watchdog, said whatever the domestic
political imperatives, pressure would be brought to bear to
stick to Plan A and use the extra cash as a buffer.
"Politicians, especially moving into the second half of
their administration, are going to be inclined to ease up on the
adjustment so they will want to use as much money as possible to
ease off on austerity," Alan Barrett said.
"But they will have people like the fiscal council to answer
to, the European Commission will have an input and the council
has been arguing that our debt sustainability, even with this,
is far from secured. There may be an argument for using some of
the extra billion to accelerate the pace of adjustment."
With opinion on the front pages of Friday's newspapers split
between Thursday's deal providing a turning point and simply
leaving future generations saddled with billions of debt, Noonan
would find such an argument a near impossible political sell.
Analysts say the coalition, which is starting to feel the
heat in opinion polls, will be sorely tempted to cash in on the
windfall the bank debt deal has provided.
"The only thing that was going to bring this government down
was maybe the absence of deal that would have put pressure on
coming up to the next budget," said Eoin O'Malley, a politics
lecturer at Dublin City University (DCU).
"But if you don't see some sort of tangible outcome at the
next budget, then there's no point in having this deal."
(Reporting by Padraic Halpin, editing by Mike Peacock)