Ireland May Have to Raise Tax, Finance Minister Says
Written on March 1, 2009
Ireland’s government will probably have to raise taxes to plug a widening hole in the public finances as the economy slides deeper into a recession, according to Finance Minister Brian Lenihan.
“Unless we take the pain now, greater sacrifices will be needed at a later date,” Lenihan said in a speech at the annual conference of the ruling Fianna Fail party in Dublin today. Tax increases are an “essential part” of the government’s economic recovery plan, he said.
Ireland’s government is grappling with a soaring budget deficit, the threat of a credit rating downgrade and a banking industry straining under the weight of the global financial crisis. Eighty-four percent of people are unhappy with its handling of the crisis, according to an Irish Independent poll yesterday, while more than 100,000 people marched in Dublin last week against proposed tax increases and spending cutbacks.
As the government battles public workers over increased taxes, it’s also had to promise a 7 billion-euro ($8.9 billion) bailout to Bank of Ireland Plc and Allied Irish Plc, the two biggest Irish lenders, and has nationalized a third, Anglo Irish Bank Corp low interest personal loan.
“Bolder and more radical steps will be taken by the government to ensure that the banking system will provide the credit for our economy,” Lenihan said.
He didn’t say whether that would involve creating a so- called bad bank or insuring banks against some property loans.
Ireland’s economy is shrinking at the fastest pace in the euro area and a surge in unemployment is undermining consumer confidence. Mortgage lending in the country advanced at the slowest pace in 23 years last month as falling prices deterred buyers, according to central bank data published yesterday.
“Of course if we could have foreseen the nature of the financial crisis, we would have done things differently,” Lenihan said. “But there is little to be gained from beating ourselves up over what has happened. We all have to get on and do what we can and do it in a united way.”
Filed in: legal.