Bloomberg News

Irish Government Draws Fire as Budget Plans Shown to Germany

November 20, 2011

Nov. 18 (Bloomberg) -- Ireland’s government laid out plans to raise sales tax and pledged to consider “ambitious” asset sales in documents shown to lawmakers in Germany before their Irish counterparts, drawing criticism from opposition politicians in Dublin.

The draft documents, provided to the German parliament’s budget committee by Chancellor Angela Merkel’s government and obtained by Bloomberg News, detail a proposed increase in value- added sales tax next year to 23 percent from 21 percent. The document is prefaced with an unsigned “Letter of Intent” from Irish Finance Minister Michael Noonan and Irish Central Bank Governor Patrick Honohan to European officials.

The German government in September pledged to better inform parliament of crisis policy following a court ruling upholding the chamber’s primacy in budget matters. As a result, the government sends senior lawmakers documents from the European Commission and its bailout partners from the International Monetary Fund and European Central Bank. The 2012 Irish budget is due to be delivered on Dec. 6.

“It would be a staggering and unprecedented breach of faith with the Irish parliament and Irish people” if budget details have been provided to German lawmakers, Michael McGrath, finance spokesman for Ireland’s largest opposition party, Fianna Fail, said in an e-mailed statement yesterday. “It would represent a fundamental breach of established protocols in relation to the disclosure of budgetary measures.”

Noonan has said he’ll seek savings of 3.8 billion euros ($5.1 billion) next year. The government is targeting 1.6 billion euros in additional revenue next year and 2.2 billion euros in spending cuts.


Ireland sought an international bailout in November 2010 when its banking crisis became too big to handle alone, and has pledged to narrow the fiscal deficit to 8.6 percent of gross domestic product in 2012.

In the documents, the government proposes cutting day-to- day spending by 1.45 billion euros and reducing capital spending by 750 million euros. Increasing sales tax will generate 670 million euros, while a new household charge would raise 160 million euros.

The government said it “stands ready to take any corrective action that may become appropriate” to meet the objectives of its aid plan. It said it will discuss a list of state assets to be sold with the so-called troika of the EC, the IMF and the ECB by the year end, before taking final decisions of what will be disposed of.

“The budgetary measures are currently being considered,” a spokesman for Noonan said in a statement yesterday. “No decisions have been taken.”

The documents also show the government is seeking to draw down 5.8 billion euros of aid following the fifth review of its bailout program, representing what it calls a “rephrasing of disbursements.”

--Editors: Dara Doyle, Ben Livesey

To contact the reporters on this story: Finbarr Flynn at; Brian Parkin in Berlin at

To contact the editor responsible for this story: Colin Keatinge at

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