Ireland Struggles With Severe Budget Cuts

Thursday, 10 Dec 2009 10:36 AM

 

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DUBLIN, Ireland ? Pity the Irish prime minister. Brian Cowen has just taken a 20 percent pay cut, leaving him the equivalent of $300,000 a year.

Two years ago the Taoiseach, as he is known, was the highest paid leader of any country in the Organization for Economic Cooperation and Development, the group of rich nations which includes the United States, Germany and France.

His cash remuneration for leading a country of 4.5 million people brings him down to the level of the Prime Minister of the United Kingdom, population 61.5 million.

The salary reduction, along with a 15 percent pay cut for ministers, is designed to lead by example and alleviate widespread anger at reductions in pay and services imposed across the board by Finance Minister Brian Lenihan in the most savage Irish budget in living memory, announced on Wednesday.

If anything it draws attention to how overpaid the leaders of this small nation still are. Vladimir Putin, the prime minister of Russia, draws a mere $137,000 a year.

Ireland is deep in debt and is in a prolonged recession. The government had to find €4 billion in extra revenue ($5.9 billion) just to service the national debt.

Announcing the budget details, Lenihan said the worst was over and Ireland was turning the corner. But the GDP slumped this year by 7.5 percent and is predicted to fall another 1.25 percent next year.

The price of recovery is pain at every level and the anger that has been mounting in Ireland over the mishandling of the economy is more likely to boil over than subside at the harshness of the budget.

The dissatisfaction among public servants, who are to suffer a pay cut of between 5 and 8 percent, is so great that their trade unions are threatening stoppages that could paralyze the country.

The body representing the country’s police force is planning to ballot members on strike action. They have been warned by Justice Minister Dermot Ahern not to do so as it is illegal in Ireland for the police to take strike action. But who would arrest the cops?

The lowest paid members of the public are facing reductions in child benefit allowance, unemployment allowances and in social services, leading opposition finance spokesman Richard Bruton to charge that the poorest are being made to pay for the bungling of the country’s finances by bankers and developers, with the connivance of the governing party, Fianna Fail.

There is some good news in the budget figures. The cost of living in a country sometimes described as “rip-off Ireland” has fallen by over 6 percent this year. And the price of alcoholic drink is to come down with a reduction in excise duty of around 14 percent.

Cheap drink is one of the reasons consumers in the Republic have been driving across the border in big numbers into Northern Ireland to do their shopping.

During a one-day stoppage by public service employees two weeks ago, there was a five mile tailback at the border as striking workers lined up bumper to bumper to do their pre-Christmas shopping in Newry in Northern Ireland.

The phenomenon of shopping in the neighboring jurisdiction has been so beneficial to the Northern Ireland economy that it officially came out of recession this month.

The good times may be over for cross-border shoppers. The value-added tax rate on goods sold in Northern Ireland will rise by 2.5 percent under the United Kingdom budget, also announced on Wednesday, and will fall by half a percent on goods in the Republic.

In a nod to the Copenhagen conference on global warming, Lenihan announced a carbon tax of €50 ($74) per tonne on petrol, diesel, home heating fuel and natural gas.


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