The European Commission’s internal market commissioner said today that he was confident Ireland would overcome its current economic difficulties.
"I am confident there is light at the end of the tunnel," Internal Markets Commissioner Michel Barnier told the Oireachtas Committee on European Affairs in Dublin today.
The strength of Irish exports, competitiveness and access to larger markets meant the country has “what it takes to win in the long term”, he said.
“I believe your future lies at the centre of Europe and Europe can help you. Make no mistake the answer to current difficulties in Ireland, and elsewhere in Europe must not be a retreat from common aims, policies and solidarities.
“If there is one lesson from the last year it is that we are all in this crisis together. What will help turn the Irish economy around again are exports and access to larger European markets.”
Speaking at a business briefing at the Burlington Hotel in Dublin today, European Commission secretary general Catherine Day said bringing the public finances back under control was a necessary starting point for economic recovery. “There is no sound economic policy without that.”
International reaction to the details of next year’s €6 billion adjustment, which will involve spending cuts of €4.5 billion and tax increases of about €1.5 billion, has been mixed.
Irish bond yields failed to stabilise following publication of the plan with the amount investors demand to hold Irish 10-year debt passing closing at 7.62 per cent (762 basis points), marginally below record highs.
The spread between Irish bonds and the German bund stands at 520 points. Documents released yesterday show the Government plan only assumes a small fall in borrowing costs next year to 6.4 per cent, dropping to 4.7 per cent in 2012.
Irish banking shares came under pressure today, with AIB falling 10.6 per cent to 26.8 cent, Bank of Ireland declining 13 per cent to 42.5 cent and Irish Life and Permanent off 19 per cent at €1.05.
International reaction to the plan, a first step in the process of reducing the budget deficit by €15 billion over four years, has interpreted the budget plan as a last-ditch attempt by the Government to restore confidence in the economy.
The Wall Street Journal said Ireland is running out of road having done "everything the market could have expected to shore up both its banks and its own finances".
Government plans to reveal details of its €15 billion four-year budget have been pushed back towards the end of this month and may not be unveiled until after the Donegal South West byelection.
A detailed four-year budget had been scheduled for publication in the next week or so but it emerged yesterday that the plan will not be disclosed until closer to the December budget.
The Government is hoping to minimise internal dissent by leaving as little time as possible between the publication of the plan and the budget on December 7th.
Speaking this morning, the Minister for Agriculture, Brendan Smith, declined to say whether the four-year plan would now be shelved until the end of the month.
"The Government is working intensively on the preparation of this plan," Mr Smith said on RTÉ's Morning Ireland. "The Government has not yet finalised its work on the four-year plan. It will be published as soon as possible."
The Taoiseach Brian Cowen said today the Government was “trying to get our plans in place for around mid-November and that is ongoing”.
Labour party finance spokeswoman Joan Burton said this evening her party was "not prepared to sign up to a draconian €6bn budget" that would kill jobs and growth.
"A balance must be struck between a credible deficit reduction effort and a targeted investment programme to boost competitiveness and create jobs," she said.
"We are proposing a twin-track approach: a fiscal adjustment in the region of €4.5bn in 2011 backed up by launching a Strategic Investment Bank to channel much-needed funds to SMEs and to deliver the modern infrastructure we need to regain competitiveness," she added.
The long-delayed Donegal ballot will be held on November 25th and the selection convention to choose a Fianna Fáil candidate takes place in Glenties on Sunday night. The date was announced yesterday following Wednesday's High Court ruling that a delay of 18 months was "inordinate".
The four-year plan, devised in consultation with the European Commission, will involve an adjustment of €15 billion, with €6 billion of that coming next year.
It is predicated on unemployment remaining close to its present rate and emigration of 100,000 people over the period.
Mr Cowen said the plan did not herald a return to the days of mass emigration.
“What we’re talking about here is the fact that we have many people who have come to Ireland over the past 10 years, many of whom are also returning home because the job opportunities obviously are no longer there in the numbers that there were.
“And there are also many of our own people who are leaving, some voluntarily, some because we haven’t been able to produce enough jobs in the immediate term.” Mr Cowen said 65,000 people left the country this year, while 30,000 came in.
Next year’s €6 billion adjustment will involve spending cuts of €4.5 billion and tax increases of about €1.5 billion.
Announcing the adjustment, Minister for Finance Brian Lenihan said yesterday that a consolidation package of €15 billion was required over the next four years.
“A significant frontloading of the consolidation in 2011 is deemed necessary and will underline the strength of our resolve and show that the country is serious about tackling our public finance difficulties,” said Mr Lenihan.
“By the end of 2011, we will have implemented over two-thirds of the overall adjustment and we will be on a path towards renewed budgetary sustainability,” he said.