Amid Bailout Talks, Ireland to Cut Spending, Boost Taxes (AIB, IRE)
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Earlier in the day today, Ireland's government said that they will cut spending by one-fifth and increase taxes gradually over the next four years as bailout talks with the European Union and International Monetary Fund reach a head.
Among the changes include a €1.9 billion boost in taxes, and €2.8 billion in welfare cuts, which are aimed at narrowing the budget deficit to just 3% of GDP by the end of 2014. The shortfall expected this year is 12% of GDP, or 32% when including the banking rescue.
Prime Minister Brian Cowen is working with the EU and IMF on an €85 billion bailout package for Ireland As reported earlier, €35 billion would go to banks, and €50 billion to help finance the Irish government.
Specifically, the government is looking to reduce runnings costs by €7 billion with investment also dropping €3 billion. New entrants into state work will see a 10% cut in pay, and minimum wage in the country will be reduced by €1 to €7.65 per hour. Sales tax will increase from 21% currently to 23% by 2014, and a new state tax will be introduced.
The corporate tax rate, at 12.5%, will remain the same.
On the news, two major Irish financial institutions are trading as opposites. Allied Irish Banks, p.l.c. (NYSE: AIB) is 9.4% higher this afternoon, and The Bank of Ireland (NYSE: IRE) is down 8.5%.
Among the changes include a €1.9 billion boost in taxes, and €2.8 billion in welfare cuts, which are aimed at narrowing the budget deficit to just 3% of GDP by the end of 2014. The shortfall expected this year is 12% of GDP, or 32% when including the banking rescue.
Prime Minister Brian Cowen is working with the EU and IMF on an €85 billion bailout package for Ireland As reported earlier, €35 billion would go to banks, and €50 billion to help finance the Irish government.
Specifically, the government is looking to reduce runnings costs by €7 billion with investment also dropping €3 billion. New entrants into state work will see a 10% cut in pay, and minimum wage in the country will be reduced by €1 to €7.65 per hour. Sales tax will increase from 21% currently to 23% by 2014, and a new state tax will be introduced.
The corporate tax rate, at 12.5%, will remain the same.
On the news, two major Irish financial institutions are trading as opposites. Allied Irish Banks, p.l.c. (NYSE: AIB) is 9.4% higher this afternoon, and The Bank of Ireland (NYSE: IRE) is down 8.5%.
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