July 18, 2010 / 10:04 AM / 9 years ago

Irish may halt budget reform early--govt party

DUBLIN, July 18 (Reuters) - Ireland may not have the political will to bring its budget deficit in line with EU rules as planned by 2014, the chairman of the smaller governing coalition member Green Party was quoted as saying on Sunday.

Investors and European leaders have praised Ireland for austerity measures culminating in 4 billion euros ($5.2 billion) of spending cuts imposed in last December’s budget for 2010.

Green Party Chairman Dan Boyle told the Sunday Tribune it was “probably a heresy” for a government party to question whether the deficit could be cut to 3 percent of gross domestic product by 2014 from more than 14 percent in 2009.

“It is certainly doable if you want to be draconian every year,” Boyle was quoted by the newspaper as saying. “But is it politically feasible and is it socially possible?”

Boyle said he still expected the cabinet to deliver the 3 billion euros of savings planned for the 2011 budget in December and then the government could “take stock”.

“I do not see the public appetite continuing,” Boyle said. “It could be that we have neutral budgets for a period.”

The Green Party last year debated quitting the alliance with Prime Minister Brian Cowen’s Fianna Fail party due to the strains of the fiscal tightening and bank rescue programme, but its members ultimately decided to stay on board.

Cowen and Finance Minister Brian Lenihan, the main architect of the reforms and also from Fianna Fail, are adamant Dublin must stick to austerity measures for the next four years.

If Ireland loosened its budget discipline, it could cause a flight of investors who already demand a hefty premium for holding Irish sovereign bonds.

So far Green ministers have supported the reforms. Boyle is chairman of the party and a member of the upper house of parliament, but not a member of the cabinet.

The budget deficit has risen partly due to the cost of rescuing banks, with much of it spent on nationalised Anglo Irish Bank [ANGIB.UL].

Boyle said he also expected the state to raise its minority holding in another lender, Allied Irish Banks ALBK.I to a majority of up to 70 percent.

Reporting by Andras Gergely; Editing by Mark Heinrich

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