The Irish government has announced the details of an emergency budget designed to shore up the country’s flagging economy.
Pre-Budget data published last week show a €5 billion (£4.5 billion) widening from the budget deficit projected in January.
Brian Lenihan, the finance minister, has proposed a raft of tax increases which should generate €3.6 billion over the course of a full year.
The emergency budget also details cuts in public expenditure which will save the government €1.215 billion in a full year. These cuts will apply to social welfare benefits including jobseekers’ allowance and the early childcare supplement, and other areas of capital expenditure such as defence and transport.
Lenihan also revised down Ireland’s growth forecast for 2009, predicting a contraction of 8% this year after 3% last year. He said: “This is a serious decline in national living standards: the sharpest fall on record.”
However, the minister said he believed the economic crisis facing the country could be managed. “Many of the factors that made us an economic success story in recent years are still with us: social cohesion, political stability, a young, well educated, flexible workforce, a pro-enterprise, export oriented economy. All of this remains intact.
“What is wrong in our economy, we can fix if we take the right course of action now and if each one of us signs up for that course of action,” he said.
Ireland lost its AAA rating from Standard & Poor’s and was downgraded to AA+ in March, with a warning the rating could drop further if the country failed to control its public finances.