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Irish braced for emergency budget Irish braced for emergency budget
(about 1 hour later)
The Irish Republic's government is to unveil its second budget in six months as the economy contracts sharply.The Irish Republic's government is to unveil its second budget in six months as the economy contracts sharply.
Dublin faces the double challenge of dealing with a deepening recession while being forced to correct the worst deficit in Europe.Dublin faces the double challenge of dealing with a deepening recession while being forced to correct the worst deficit in Europe.
Unemployment is tipped to near 12% in 2009 and based on government forecasts the deficit could reach four times the level allowed by the European Union.Unemployment is tipped to near 12% in 2009 and based on government forecasts the deficit could reach four times the level allowed by the European Union.
The Irish emergency budget is likely to mean higher taxes and lower spending.The Irish emergency budget is likely to mean higher taxes and lower spending.
This is in contrast to other countries, which have been spending billions and cutting taxes as a means to economic recovery.This is in contrast to other countries, which have been spending billions and cutting taxes as a means to economic recovery.
The Republic's Taoiseach, or prime minister, Brian Cowen, primed his fellow citizens to expect bad news during a speech aired on YouTube: "The coming months and years we will be asking people to take the strain, to make more sacrifices," he said.The Republic's Taoiseach, or prime minister, Brian Cowen, primed his fellow citizens to expect bad news during a speech aired on YouTube: "The coming months and years we will be asking people to take the strain, to make more sacrifices," he said.
ModelModel
The days of major foreign investments, especially from American technology companies, are over.The days of major foreign investments, especially from American technology companies, are over.
FROM THE TODAY PROGRAMME More from Today programme FROM THE TODAY PROGRAMME More from Today programme
From the late 1990s economists were praising the Irish Republic as the model to follow.From the late 1990s economists were praising the Irish Republic as the model to follow.
Multi-national firms were attracted to a European Union country where running costs were cheap and there was a highly skilled English-speaking workforce.Multi-national firms were attracted to a European Union country where running costs were cheap and there was a highly skilled English-speaking workforce.
As fewer Irish workers emigrated and foreign migrants flocked to share the state's wealth, demand for houses jumped.As fewer Irish workers emigrated and foreign migrants flocked to share the state's wealth, demand for houses jumped.
That prompted a boom in construction which drove the economy forward.That prompted a boom in construction which drove the economy forward.
Tens of thousands of Irish people invested in properties overseas.Tens of thousands of Irish people invested in properties overseas.
The state's newspapers were full of advertisements selling apartments in places like Bulgaria, Portugal and Spain.The state's newspapers were full of advertisements selling apartments in places like Bulgaria, Portugal and Spain.
DownturnDownturn
Banks were only too willing to lend money for construction projects.Banks were only too willing to lend money for construction projects.
But that strategy has returned to haunt Irish banks, as troubled construction firms now struggle to sell houses or land and the usual remedy of seizing the assets is risky because they have dropped in value.But that strategy has returned to haunt Irish banks, as troubled construction firms now struggle to sell houses or land and the usual remedy of seizing the assets is risky because they have dropped in value.
The fall-out of the global downturn has hit the country hard and the collapse of the construction boom has sent the economy into a tailspin.The fall-out of the global downturn has hit the country hard and the collapse of the construction boom has sent the economy into a tailspin.
Austin Hughes, chief economist at the Irish arm of Belgium's KBC Bank, has watched the health of the Celtic Tiger deteriorate.Austin Hughes, chief economist at the Irish arm of Belgium's KBC Bank, has watched the health of the Celtic Tiger deteriorate.
"The government faces problems at home from people losing their jobs and internationally from financial markets, who are wondering if the Irish economy could eventually default. That isn't going to happen, but the government needs to show that it is prepared to take tough measures," he said."The government faces problems at home from people losing their jobs and internationally from financial markets, who are wondering if the Irish economy could eventually default. That isn't going to happen, but the government needs to show that it is prepared to take tough measures," he said.
Recovery will be a long-term process and much will depend on sales by Irish companies abroad.Recovery will be a long-term process and much will depend on sales by Irish companies abroad.
DeficitDeficit
Kick-starting exports is vital for the revival of the economy and a challenge for Enterprise Ireland, the state body that helps companies boost overseas sales.Kick-starting exports is vital for the revival of the economy and a challenge for Enterprise Ireland, the state body that helps companies boost overseas sales.
Prime Minister Brian Cowen has warned that things will remain toughPrime Minister Brian Cowen has warned that things will remain tough
According to Stephen Hughes, Enterprise Ireland's director for Northern Europe, a recession brings opportunities: "Most of our companies are relatively small and nimble footed and can move themselves around in their existing markets, indeed into other markets, with relative ease."According to Stephen Hughes, Enterprise Ireland's director for Northern Europe, a recession brings opportunities: "Most of our companies are relatively small and nimble footed and can move themselves around in their existing markets, indeed into other markets, with relative ease."
We will learn more about the mettle of the Irish coalition government. Politicians know that raising taxes is not a vote winner but other options are limited.We will learn more about the mettle of the Irish coalition government. Politicians know that raising taxes is not a vote winner but other options are limited.
The Republic has to reduce its huge deficit and the taxpayers will be leaned on.The Republic has to reduce its huge deficit and the taxpayers will be leaned on.
The government in Dublin has reassured the power brokers in Brussels that it will not have to make an emergency dash for the IMF's cash machine, like its fellow European Union members Hungary, Latvia and Romania.The government in Dublin has reassured the power brokers in Brussels that it will not have to make an emergency dash for the IMF's cash machine, like its fellow European Union members Hungary, Latvia and Romania.
The European Union has given the Irish five years to get the budget deficit under control but the decision makers in Brussels are watching carefully.The European Union has given the Irish five years to get the budget deficit under control but the decision makers in Brussels are watching carefully.
Later this year the Republic will hold a second referendum on the Lisbon Treaty, aimed at streamlining EU institutions to make the enlarged bloc of 27 states function better.Later this year the Republic will hold a second referendum on the Lisbon Treaty, aimed at streamlining EU institutions to make the enlarged bloc of 27 states function better.
Europe's politicians are hoping Irish voters do not react to the recession and try to punish the government by killing off the Treaty that is key to European Union's future.Europe's politicians are hoping Irish voters do not react to the recession and try to punish the government by killing off the Treaty that is key to European Union's future.
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