December 6, 2011 / 5:51 PM / 8 years ago

UPDATE 1-Ireland cuts outlook under Europe's shadow

* Cuts GDP 2012 growth forecast to 1.3 pct from 1.6 pct pvsly

* Maintains GDP growth forecasts for 2013-2015

* Says 2012 budget deficit target still achievable

* Scraps plans to end upward-only rent reviews

* To establish group to advise on future strategy for NAMA

By Carmel Crimmins and Padraic Halpin

DUBLIN, Dec 6 (Reuters) - Ireland cut its growth forecast for next year and fleshed out 1 billion euros worth of fresh tax measures on Tuesday under the shadow of a euro zone debt crisis that threatens to derail its fragile recovery and force even more austerity on its recession-weary people.

Finance Minister Michael Noonan cut his outlook for Gross Domestic Product (GDP) growth to 1.3 percent from 1.6 percent, the second downgrade in a month, as the risk of a euro zone recession hits the outlook for export growth and keeps the Irish consumer locked in a protracted downturn.

Noonan insisted the budget deficit target for this year was still on track but a worsening growth outlook could force him to push through even harsher austerity budgets in 2013 and beyond if Dublin is to meet its goals under an EU-IMF bailout.

“No matter what happens in the wider eurozone, Ireland needs to restore sustainability to its public finances,” Noonan told a packed lower chamber.

“If the euro zone crisis recedes, we are amongst the best placed to grow quickly, as evidenced by the EU Commission’s growth forecasts. If the euro zone crisis persists, it is equally important for the state to reduce our dependence on borrowing.”

Standard & Poor’s warned late on Monday it could cut Ireland’s credit rating as part of a mass euro zone downgrade, leaving it one level shy of junk status, if Europe does not deal with its financial problems.

Until this week, S&P had been the most positive of the three main credit rating agencies on Ireland, rewarding its government with a stable outlook in August for its efforts in tackling the worst budget deficit in the industrialised world and a banking meltdown.

“If they didn’t revise the growth forecast down, the whole framework would have lacked credibility. You would have to say that the risks to that forecast are on the downside in 2012,” said Jim Power, chief economist at Friends First.

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Noonan’s tax plans, which come on the heels of 2.2 billion euros in spending cuts announced on Monday, were largely known after Reuters obtained details of the budget in documents given to German lawmakers last month.

The centre-piece of Noonan’s tax plans are a two percentage point increase in the top rate of sales tax, which will raise 670 million euros as it is applied to around half of all goods and services. The new 23 percent rate is the highest in the euro zone, along with Greece, Portugal and Finland.

The remaining 330 million euros in tax revenues will be generated from indirect taxes including higher capital gains and capital acquisitions taxes and a new 100 euros a year household charge, the sixth new tax introduced in the past three years.

In addition, some 600 million euros will be generated from tax measures carried over from last year.

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