Ireland's austerity plan draws mixed reactions
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The four-year austerity plan published by the Irish government on Wednesday have drawn mixed reactions.
The Irish government unveiled its four-year budget plan on Wednesday and was committed to cutting its deficit by 6 billion euros (about 8 billion U.S. dollars) in 2011 and 15 billion euros by 2014 to keep its deficit below 3 percent of gross domestic product (GDP).
Dublin promised to cut social welfare expenditures, reduce minimum wage and increase valued-added tax from 21 percent to 22 percent in its austerity plan.
Economist and strategist for BNP Paribas in London Shahin Vallee said: "There are a great deal of details but nothing fundamentally new."
Vallee said that there were no additional measures to deal with the current crisis and the corporate tax was not included in the plan.
There have been suggestions that Ireland should raise its low corporation tax of 12.5 percent to increase revenue. Some EU countries have reportedly held grievance against Ireland, accusing it of unfair competition. The relatively low corporate tax has attracted substantial foreign investment in the country and boosted its economic growth. Ireland as a result dismissed the idea of raising it.
European Commissioner for Economic and Monetary Affairs Olli Rehn said recently that Ireland will cease to be a low-tax country but whether to raise the corporate tax is up to the Irish government.
However, Hosuk Lee-Makiyama, co-Director of the European Centre for International Political Economy (ECIPE) said this is not a good moment to increase the tax.
"The criticized strategy to extending the wage taxes (for the workers) rather than raising the rebated corporate taxes may seem unjust, but it is the only way open for Ireland at the moment: it is impossible to save your way through the crisis, and given lack of monetary instruments, keeping the low corporate taxes may be the only "stimulus" they got left," Lee-Makiyama said.
"Or putting it differently, this would be a particularly bad moment for a massive corporate flight out of Ireland," he added.
Meanwhile, the European Union (EU) Wednesday welcomed the austerity plan, saying it is "a sound basis" for the negotiations between Dublin and the EU and the International Monetary Fund (IMF) .
European Commissioner for Economic and Monetary Affairs Olli Rehn said in a statement that the fiscal plan is an important contribution to the stabilization of Irish public finances.
"The plan strikes a good balance of durable expenditure and revenue measures, with due regard to protecting the least well off, " Rehn said. He also hailed the structural reform commitments in the plan, saying "these policies encourage exports and a recovery of domestic demand." A joint mission from the EU and the IMF and the European Central Bank is currently in Dublin, trying to devise an aid package for Ireland. The EU has said that the aid package to Ireland will be based on the four-year austerity plan.
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