FOUR YEAR PLAN TO SIGNAL BUDGET MOVES - Cabinet talks on the four-year €15 billion plan happen this morning, and a severe Budget, which will tackle the first €6 billion of that €15 billion, will follow in a few weeks. We were told at the weekend press conference, held by Taoiseach Brian Cowen and Finance Minister Brian Lenihan, that the €15 billion will include tax increases totalling €5 billion and spending cuts of €10 billion. As the IMF carries on talks with the Government over a bail-out package it has published a 'staff position note' on ways to promote growth in the euro area. Among the suggestions for Ireland are a decrease in the minimum wage, a gradual decrease in benefits, increased financing for training agency FÁS, and tax benefits for women returning to the workforce.
Brian Keegan, director of taxation at Chartered Accountants Ireland, says that he is quite encouraged by the note from the IMF, which says it is crucial for Ireland to focus on high quality jobs. He says the country actually scored quite well. On the four-year plan - due to be published tomorrow - Mr Keegan says that the plan will shape what is going to happen on Budget day on December 7. It will give a clear indication of how the Government wants to take and wants to cut in December. He says the Govermment is faced with the dilemma of ensuring that the economy continues to grow despite the austerity measures to be introduced next month. He says the Government will be looking at increasing both direct taxes, such as income tax, and indirect taxes, such as VAT. But he says that any increases in VAT will come towards the end of the four year plan as any rises could hit domestic consumption and therefore affect economic growth.
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MORNING BRIEFS - ECB governing council member and Governor of the Central Bank of Finland, Erkki Liikanen, said on Finnish television today that a tight programme by the European Commission and the IMF is needed, along with Ireland's own commitment, to solve Ireland's crisis. He said it is important to secure that Ireland's crisis will not restart a negative cycle in Europe. He said also that the euro will survive the current crisis, and that he found it impossible that the euro zone would split into two different groups.
*** Overnight in Washington, the White House said Ireland's acceptance of outside help to tackle its banking crisis was 'good news'. The rescue plan is being seen as a relief in Washington, and a sign that Europe is confronting a problem that could sap US recovery. Apparently US President Barack Obama had been briefed on the financial situation in Ireland, as well as Portugal.
*** Bank shares were among the biggest fallers in Europe yesterday, with Irish banks dropping amid uncertainty about what measures are being planned to restructure the banking system. In Dublin, Irish Life and Permanent lost 27%, dropping to to 84 cent, Bank of Ireland fell 19% to 39 cent and AIB dropped 6.2% to 41 cent.
*** There is talk of banks on the front page of the The Daily Telegraph - it says that British banks lost billions of pounds in value yesterday after the Irish bail-out was thrown into jeopardy over concerns that the Government might collapse. The share prices of Lloyds, which owns what was Bank of Scotland Ireland, and Ulster Bank owner Royal Bank of Scotland fell sharply.
*** On the currency markets, the euro is trading at $1.3556 cents and 85.16 pence sterling.
