The Irish Government has announced details of its, IMF/ECB agreed, four year national recovery plan [pdf file]. The BBC provides some key points. And The Guardian continues its live-coverage of Ireland’s financial crisis.
2.37pm: Cowen has explained that negotiations with the IMF are based on the assumption that €6bn of the €15bn cutbacks will be implemented in 2011.
That means that 40% of the total programme is ‘front-loaded’.
The aim is to slash Ireland’s deficit to 3% of its GDP. The report predicts that the deficit for 2010 will hit 11.7% of GDP, slightly over the target of 11.6%. It is forecast to drop to 9.1% in 2011, 7% in 2012, 5.5% in 2013 and 2.8% in 2014.
The plan admits that domestic demand will be hurt by the austerity drive. Lenihan, though, insits there is no alternative:
“The reality for this country is that it has to control a spiralling deficit, and then reduce it“
And let’s not forget the bigger picture…
Adds Writing before the plan was published, the BBC’s Stephanie Flanders had this to say
Update, 12:30: I see the ratings agency Standard and Poor’s has similar fears for Ireland’s economy, which partly explains their decision to downgrade Ireland’s sovereign debt, yet again. Here’s a few nuggets from today’s press release:
“As a consequence of the high overhang of private debt, fiscal austerity, and the uneven outlook for external demand in Europe, Standard & Poor’s now expects close to zero nominal GDP growth for 2011 and 2012. We do not envisage GDP exceeding 2% a year in real terms before 2013.”
“While export performance is forecast to remain firm over the medium term, we are of the further view that domestic demand will most probably stagnate, thwarting any immediate recovery in tax revenues.
“In our view, downside risks of deflation remain. These depend partly on the external environment and the speed with which the financial sector can recover sufficiently to contribute to the economy again. Meanwhile, uncertainties surrounding the timing and extent of imposed burden sharing by EU institutions have raised refinancing costs. In our opinion, these refinancing costs are likely to remain high until investors perceive the forecasts for primary fiscal balances as much improved.“Of course, the value of the assets sitting on the banks’ balance sheets will be affected by the state of the property market and the overall economy. So will the state of the budget. It’s a simple point but an absolutely crucial one. If the economy doesn’t get better, then neither will the banks or the national budget. Right now, international markets don’t seem to have much confidence in any of them.
Update The Irish Times has extensive coverage
And from the Guardian’s live-blog
5.20pm: This is interesting — the opposition Fine Gael party has just revealed that it will release its own four-year fiscal plan next week.
Michael Noonan, who is likely to become Ireland’s next finance minister if Fine Gael triumph, also said that he has been told by European officials that today’s package can be “renegotiationed” in the future:
“I’m please that the Commission has agreed that any and all of this document can be renegotiated,” Noonan said, according to Reuters in Dublin.