Rehn heading to Dublin for budget talks

European commissioner and Irish officials will discuss plans to cut the country’s budget.

Olli Rehn, the European commissioner for economic and monetary affairs, will head to Ireland next week to seek details of a revised budget-cutting plan amid increasing worries that the country will need a bail-out to get out of its deep debt crisis.

European Commission officials said today (5 November) that Rehn’s visit would focus on discussions with senior Irish officials about their four-year plan to speed up budgetary cuts in an effort to calm the bond market.

Brian Lenihan, Ireland’s finance minister, yesterday said that his government would look to make €6 billion worth of savings in the country’s 2011 budget, through deeper cuts and higher taxes.

The new plan is meant to bolster credibility in Ireland’s economic restructuring plan, which has so far met widespread scepticism on the financial markets. The Irish government last month said that it will have to make spending cuts of up to €15bn over the next four years to get the country back in line with EU rules. The budget deficit is expected to hit 32% of gross domestic product (GDP) this year. This figure includes the costs linked to recapitalisation of Ireland’s banking sector.

A spokesman for Rehn said the commissioner’s two-day visit to Dublin, starting on Monday (8 November), would aim “to discuss in detail” all aspects of the Irish budget and plans to get its budget deficit under the eurozone’s 3% of GDP threshold by 2014.

“He wants to have these discussions not only with Mr Lenihan…but also with all those who can contribute to redress this budgetary situation in Ireland, those who are concerned about the future of the Irish economy and are ready to contribute,” the spokesman said.

He said that as well as meeting government officials, Rehn would also hold talks with labour leaders, the governor of the Irish Central Bank and leaders of all political parties.

Rehn yesterday welcomed the revised budget-cutting plan, saying it provided “an important anchor for financial markets” and assured Ireland’s commitment to lowering its public debt.

The commissioner’s enthusiasm was not shared by investors. Despite the revised budget plan, details of which are still unknown, yields on 10-year bonds rose to 7.62% yesterday, breaking a record of 7.5% set the day before.

• Investors also reacted negatively to an austerity budget passed by Portugal’s government on Wednesday (3 November). The budget aims to cut the country’s deficit from 7.3% of GDP this year to 4.6% in 2011. Public-sector wages will be cut and taxes increased. Portuguese government officials tried to reassure investors yesterday after yields on Portuguese ten-year bonds hit 6.5% on Wednesday. Portugal hopes to sell up to €1.25bn in six- and ten-year bonds next Wednesday (10 November).

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