Europe

Irish economy remains fragile, warns Taoiseach Enda Kenny

  • 5 December 2011
  • From the section Europe

The Irish Republic's economy remains fragile and is likely to take years to recover, Taoiseach Enda Kenny has warned in a rare televised address.

He said the "four-year path to recovery" would be difficult for many, including home owners, the jobless, and people trying to fund an education.

Ahead of an austerity budget, he also warned the country was spending 16bn euros more than it was taking in.

The address was the first of its kind by an Irish leader in 30 years.

"Let me say this to you, you are not responsible for this crisis," said Mr Kenny.

"My government is determined that now, the necessary decision and challenges are made to ensure that this is never allowed to happen again."

Dole payments

He added: "I know this is an exceptional event. But we live in exceptional times. And we face an exceptional challenge."

Public spending in the Irish Republic will be cut by 2.2bn euros (£1.9bn) a year and taxes raised by 1.5bn euros, Mr Kenny said. He said income tax would be untouched but indirect taxes would be raised.

The proposals, which are due to be outlined in more detail in the Irish parliament later, are expected to include a rise in vehicle tax, cuts in some welfare entitlements and an increase in VAT to 23%.

The budget is also expected to include cuts to child benefit of up to 10 euros a month, dole payment cuts of around eight euros a week and a 50 euros annual fee on medical cards.

The Irish Republic is trying to save 3.8bn euros in a new round of cost-cutting measures following last year's international bailout.

Mr Kenny, who came to power in February, said the Irish economy remained fragile but job creation would be at the centre of the recovery.

He said steps to recover from the Irish economic crisis had been taken since last year but the crisis remained.

"This budget will be tough. It has to be tough," Mr Kenny warned.

"Right now the state is spending 16 billion a year more than it is taking in," he said.

"This problem will not be fixed unless we take action to bridge this gap. This can only be done by us, ourselves, working together."

Mr Kenny added: "I do not for a moment want to make it sound simplistic or painless. It is not. 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."

Italian taxes

His address was the first of its kind since Charles J Haughey made a similar appeal in 1980 when he claimed the Republic of Ireland was living beyond its means.

The second part of the budget will be announced on Tuesday - on the 89th anniversary of the signing of the Irish Treaty and the creation of the Free State.

The proposals come as Italy's new government adopted a package of emergency austerity measures aimed at fending off bankruptcy and saving the euro from collapse.

Taxes on the assets of the wealthy will go up, as will pension ages, and there will be a major drive to tackle tax evasion.

Italian Prime Minister Mario Monti said the measures were necessary to "save Italy", and announced he would give up his own salary as part of the effort.

The plans must still be approved by the Italian parliament.

More on this story