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| Dublin set to unveil four-year austerity plan | Dublin set to unveil four-year austerity plan |
| (40 minutes later) | |
| The Irish government is set to publish an austerity plan required for its EU- and IMF-led bail-out. | The Irish government is set to publish an austerity plan required for its EU- and IMF-led bail-out. |
| It follows another day of market angst, with shares down sharply on Tuesday and the euro 1.9% lower against the dollar. | It follows another day of market angst, with shares down sharply on Tuesday and the euro 1.9% lower against the dollar. |
| The four-year plan targets total cuts of 15bn euros ($20bn; £13bn), or 11% of the Irish economy's annual output. | The four-year plan targets total cuts of 15bn euros ($20bn; £13bn), or 11% of the Irish economy's annual output. |
| Meanwhile, state broadcaster RTE said the Republic had agreed an 85bn euro bail-out package in a report called "premature" by the government. | Meanwhile, state broadcaster RTE said the Republic had agreed an 85bn euro bail-out package in a report called "premature" by the government. |
| The four-year austerity plan to be revealed on Wednesday is a precondition for the financing. | The four-year austerity plan to be revealed on Wednesday is a precondition for the financing. |
| It will provide some detail of spending cuts and tax rises, including a hefty 6bn euros expected for next year, with the aim of bringing the government's budget deficit down to a target of 3% of GDP by 2014. | It will provide some detail of spending cuts and tax rises, including a hefty 6bn euros expected for next year, with the aim of bringing the government's budget deficit down to a target of 3% of GDP by 2014. |
| It will also outline how Dublin intends to reform its banking sector which it has needed to inject with 45bn euros. | It will also outline how Dublin intends to reform its banking sector which it has needed to inject with 45bn euros. |
| According to the RTE report, the government will inject money into the banks, increasing their capital - the cushion against future losses - to 12% of assets from 8% currently. | According to the RTE report, the government will inject money into the banks, increasing their capital - the cushion against future losses - to 12% of assets from 8% currently. |
| The move would probably involve the government all but nationalising Allied Irish Bank and Bank of Ireland. | The move would probably involve the government all but nationalising Allied Irish Bank and Bank of Ireland. |
| Painful conditions | Painful conditions |
| Some hints of the plan's contents have been provided by an IMF report on European economic reform that has been published on the Fund's website. | Some hints of the plan's contents have been provided by an IMF report on European economic reform that has been published on the Fund's website. |
| The IMF recommends that the Republic should gradually cut unemployment benefits the longer a person is out of work. | The IMF recommends that the Republic should gradually cut unemployment benefits the longer a person is out of work. |
| It also said the country should review its minimum wage - one of the highest in the eurozone - to bring it in to line with the general fall in wage levels. | It also said the country should review its minimum wage - one of the highest in the eurozone - to bring it in to line with the general fall in wage levels. |
| The findings were approved for publication on Monday by the same senior IMF official who has been leading the team negotiating with the Irish government. | The findings were approved for publication on Monday by the same senior IMF official who has been leading the team negotiating with the Irish government. |
| However, in comments on Tuesday, senior IMF official John Lipsky insisted that the political decisions would be up to the Irish government. | However, in comments on Tuesday, senior IMF official John Lipsky insisted that the political decisions would be up to the Irish government. |
| The size and details of the cuts are probably of secondary importance, says Marco Annunziata, chief economist at Unicredit Bank. | The size and details of the cuts are probably of secondary importance, says Marco Annunziata, chief economist at Unicredit Bank. |
| Notes from a smaller Ireland | Notes from a smaller Ireland |
| There is a risk that Taoiseach Brian Cowen's government may not survive the vote on its 2011 budget - the first austerity budget in the four year plan - due on 7 December. | There is a risk that Taoiseach Brian Cowen's government may not survive the vote on its 2011 budget - the first austerity budget in the four year plan - due on 7 December. |
| It follows the possible loss of support of two independent members of the Dail, as well as of some of his Mr Cowen's Fianna Fail backbenchers. | It follows the possible loss of support of two independent members of the Dail, as well as of some of his Mr Cowen's Fianna Fail backbenchers. |
| "Markets are looking for whether or not the political consensus is sufficiently strong to support [the budget]," said Mr Annunziata. | "Markets are looking for whether or not the political consensus is sufficiently strong to support [the budget]," said Mr Annunziata. |
| Another concern is that the austerity measures may prove self-defeating. | Another concern is that the austerity measures may prove self-defeating. |
| Nobel prize winning economist Paul Krugman argued that the Irish spending cuts will lead to a deeper recession. | Nobel prize winning economist Paul Krugman argued that the Irish spending cuts will lead to a deeper recession. |
| He said this in turn would worsen the deficit as tax revenues fell, unemployment benefit payments increased, and losses at the state-guaranteed banks mounted. | He said this in turn would worsen the deficit as tax revenues fell, unemployment benefit payments increased, and losses at the state-guaranteed banks mounted. |
| Market fears | Market fears |
| Although a bail-out is widely anticipated, it has done little to soothe market fears that the debt crisis will broaden to other European governments. | Although a bail-out is widely anticipated, it has done little to soothe market fears that the debt crisis will broaden to other European governments. |
| Global stock markets dropped sharply on Tuesday, led by banks, particularly those most heavily exposed to Ireland, Portugal, Greece and Spain. | Global stock markets dropped sharply on Tuesday, led by banks, particularly those most heavily exposed to Ireland, Portugal, Greece and Spain. |
| The interest rate the Spanish government had to agree to pay to raise short-term funds rose sharply at a bond auction on Tuesday. | The interest rate the Spanish government had to agree to pay to raise short-term funds rose sharply at a bond auction on Tuesday. |
| The yield on longer-term 10-year bonds also rose to a new highs, reflecting these concerns. | The yield on longer-term 10-year bonds also rose to a new highs, reflecting these concerns. |
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