Irish cabinet finalising plans to cut budget deficit

The Irish government is to hold a cabinet meeting this weekend to finalise its four-year-plan to cut its budget deficit, the BBC has learnt.

The meeting will take place on Sunday, with details published by Tuesday.

Meanwhile talks between Dublin and the European Union, the European Central Bank and the International Monetary Fund (IMF) are continuing.

The Republic is negotiating the terms of a bail-out worth tens of billions of pounds to shore up its public finances.

Two key areas will form the basis of the discussions, says BBC business correspondent Joe Lynam:

* The country's precarious fiscal situation which has pushed the budget deficit to 32% of gross domestic product
* How best to prop up the country's enfeebled banking sector which has been frozen out of international markets and all-but nationalised

'Non-negotiable' rate

Dublin's four-year plan is expected to set out how it will reduce the deficit to below 3% by Tuesday at the latest.

Then, and only then, are the terms of any international bailout expected to be published, says our correspondent.

However, the Irish government has insisted it will not raise the country's low corporation tax rate in return for a European Union-led bail-out.

Deputy Prime Minister Mary Coughlan said the 12.5% rate - much lower than the EU average - was "non-negotiable".

Her comments come as speculation grows that France and Germany want Dublin to raise the tax in return for aid.

Meanwhile, Allied Irish Banks (AIB) said 13bn euros ($18bn; £11bn) of deposits had been withdrawn this year, mostly from businesses and institutions - implying that the bank does not face a run by ordinary depositors.

The figure represents 15% of the 84bn euros of customer accounts that the bank reported possessing at the end of last year.
Bank woes

Although the Irish government claims to be fully-funded until the middle of next year, it has provided a blanket guarantee to the Irish banks, some of whom are now finding it impossible to borrow money in the markets.

On Thursday, the Irish government admitted for the first time that it needed outside help.

Finance Minister Brian Lenihan said he felt "no sense of shame" over the country's economic record, but that it now needed outside help.

Previously the government had said it did not need any financial support from the European Union and International Monetary Fund (IMF).

The Republic's low corporation tax has been criticised by other EU nations, who argue that it gives the country too much of an advantage in attracting overseas investment.

They now argue that the Republic should not be allowed to solely rely on a bail-out, and that it should instead raise the tax rate to help boost government funds.

Source:
BBC.co.uk