DECEMBER 2011/JANUARY 2012
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Ireland remains in crisis' says Taoiseach in address
THE GERMAN Chancellor Angela Merkel met with Enda Kenny in Berlin on November 16.
Fury in Dublin as Germans are first to hear of Irish VAT increase
DUBLIN - Opposition TDs were furious when they learned that members of the German Parliament had been given a copy of Ireland's budget proposals while they were being kept in the dark.
The Taoiseach and his ministerial colleagues were presumably just as angry that the document became public in this way, but publicly they played down its significance.
The controversy started when Reuters reported that Minister for Finance Michael Noonan was planning to increase the VAT rate from 21 percent to 23 percent.
The information was contained in a document distributed to German parliamentarians who sit on a budget committee in the Bundestag.
Initially the government line was to say that no decisions had in fact been taken in relation to the budget. All that meant, of course, was that the proposals had yet to be formally approved by the Cabinet.
It seems that under the EU/ECB/IMF EU85 billion loan agreement, Ireland must submit budgetary proposals to the Troika. This means a copy ends up with the European Commission. It in turn sends a copy to the finance minister of each EU member state.
It should stop there but in Germany a court has ruled that the parliament must give final approval to continued support for loan deals such as the one agreed with Ireland. Copies were therefore given to members of Bundestag's budget committee. At least one of them did not treat it with the confidentiality it deserved.
Opposition TDs argued that, as German politicians had been given the document, they should also receive a copy.
But while the Opposition could express its anger publicly and make political capital from the situation, government backbenchers must have been quietly
seething that they too appeared to come lower in the pecking order than members of the German Parliament.
After about 24 hours the government decided that it was pointless trying to suggest that the leak was inconsequential. Minister for Finance Mchael Noonan finally came out and said yes, he would be proposing a VAT increase of two percentage points.
It was, he said, a choice between this and increasing income tax. The latter, he claimed, would cost jobs and an indirect tax such as VAT was a safer option.
Few seemed to agree with him. A VAT increase, it was widely argued, would cause further damage to the retail sector and would be catastrophic for businesses close to the border.
Once again there would be an appreciable difference in VAT rates on each side of the border and shoppers would again flock North for the lower prices.
It was also claimed that shoppers would not confine their Northern shopping to items that were noticeably cheaper, they would make all their purchases at one time, including those items that are zero-rated.
Noonan also insisted that VAT is less onerous on lower income households as most of their expenditure is on zero-rated items such as food, but that ignores the fact that lower-income households do not have enough income to be caught in the tax net or they rely on social welfare.
The government anticipates that the VAT increase will provide the Exchequer with an additional EU670 million but critics argue that much of this will actually go north of the border.
The document also confirms that a flat-rate property tax of EU100 per house will be included in the budget, generating EU160 million, and that reform of capital gains tax will yield EU100 million.
DUBLIN - In a historic address to the nation on December 4, Taoiseach Enda Kenny spoke about a long road to recovery for a "fragile" economy.
He said he wanted to speak to the people directly about the challenges they faced on the eve of the budget. He warned that Ireland is spending 16 billion euro more that it is taking in from taxes.
In a sombre, low-key address he emphasised that the country would have to face the 'challenges' together. He said the budget would be "tough" and could not protect all those who were vulnerable.
"I would love to tell you tonight that our economic problems are solved, that the worst is over. But for far too many of you, that is simply not the truth," he said.
"Let me say this to you, you are not responsible for this crisis," said Kenny.
TAOISEACH ENDA KENNY
"My government is determined that now the necessary decision and challenges are made to ensure that this is never allowed to happen again."
The historic address was the first of its kind in three decades. Charles J. Haughey made a similar appeal in 1980
when he claimed the country was living beyond its means, and before him, Jack Lynch and Garrett Fitzgerald delivered their own addresses.
The second part of the budget will be announced on December 6, which marks the 90th anniversary of the signing of the Irish Treaty and the creation of the Free State.
Kenny said he chose to address the Irish people directly as the nation faces such a crisis - as a community, as an economy and as a country. "I know this is an exceptional event," he said. "But we live in exceptional times. And we face an exceptional challenge."
He also warned that the spending cuts and tax hikes, which will be announced on December 5 and 6 respectively, would be difficult for the nation.
"I do not for a moment want to make it sound simplistic or painless. It is not," he said. "We are on a four year path to recovery. This, our first budget, is a necessary step, but it will include cuts to many worthwhile projects."
GENERATION EMIGRATION:
75,000people to leave Ireland next year
DUBLIN - Tens of thousands more will flee Ireland next year as the chances of recovery hang on the outcome of the eurozone crisis, a leading think-tank has warned.
Deepening international uncertainty over the future of the euro has forced a more pessimistic rethink on the prospects at home, according to the latest study.
The Economic and Social Research Institute (ESRI) revealed its forecast for next year is worse than previously thought because of ongoing financial turmoil globally.
The homegrown economy is expected to grow at less than one percent during 2012 - barely half of what was predicted in the think-tank's last quarterly report.
The downgrade is based on an anticipated hit on Irish exports because people around the world will buy less during the uncertain climate.
Irish shoppers are also expected to squirrel away savings and spend less, contributing to a 1.5 percent drop in demand for goods and services despite former forecasts that it would remain stable.
David Duffy, co-author of the ESRI report, said the result will be an increasing difficulty for Ireland to pay off its repayments under the EU/IMF rescue deal.
"For the forecast period that we are looking at - 2011 and 2012 - we should meet our targets," he said.
"But beyond that it depends on the international environment and if that continues to deteriorate, then that would make meeting our targets more difficult. Ultimately it's what happens
internationally that will determine the outcome for Ireland."
Unless the international mood picks up, Ireland faces even bigger spending cuts and more punishing tax hikes than already anticipated to meet the terms of the bailout agreement.
Both unemployment and emigration are forecast to continue next year.
The number of people working should dip from 1,807,000 to 1,785,000 - a drop of22,000 - but many of thesejob losses will not show up in the official unemployment figures because around
40,000 people are expected to emigrate.
The ESRI said that will be on top of the 35,000 people who will emigrate this year.
Unemployment next year is predicted to average around 303,000 or 14.5 percent of the workforce, according to the report.
Duffy said a worst case scenario for Ireland in the coming months was a break-up of the eurozone, which would plunge the country further into crisis, but he added the ESRI was "reasonably optimistic" about a resolution.
Austerity is not for everyone
A survey conducted by Deloitte suggests that Christmas-related spending in Ireland will again be the highest in Europe, on a per-household basis. Ireland traditionally held the title but Luxembourg took over the mantle for the past two years.
It is anticipated that the average Irish household will spend EU943 on presents, food, drink and socialising. This is down from EU 1,020 last year.
Another sign that the word austerity has different meanings for different people was evident from the Aer Lingus ads offering "low cost" flights to U. S. destinations for Christmas shopping. Meanwhile Irish Ferries is advertising what it claims to be bargain fares for those who wish to do their Christmas shopping in Britain.
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President takes pay cut
Irish President Michael D. Higgins has taken a voluntary pay cut of 23.5 percent, bringing his annual salary down from EU325,507 to EU249,014; a similar pay cut was taken by his predecessor, Mary McAleese. The president has also said that he will not be collecting the EU88,000 pension due to him as a former minister, TD and senator, while he remains in office.
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Ireland worst heroin problem
A new EU survey labels Ireland as the country with the worst heroin problem. The researchers found just over seven cases of opiate use per 1,000 population. Italy and Luxembourg were next among the 17 countries in the survey with a little under six per 1,000 using the drug.
Although not the worst of the 28 nations globally included in a survey of cocaine use, Ireland was ranked highly in the use of cocaine, lying in sixth place. Cannabis use seems to be less prevalent in Ireland than most other countries. Of 12 states surveyed Ireland ranked eighth.