Correspondent's Choice

This story about Irish austerity measures was published by EurActiv on 10th November 2010.

EU Economic and Financial Affairs Commissioner Olli Rehn failed to forge a consensus on an austerity budget between Ireland’s shaky government and opposition yesterday (9 November) as investors weighed the risk of a second eurozone state requiring help with crushing debts.

The political impasse in Dublin and worries about a key Portuguese debt auction on Wednesday unnerved markets, sending the risk premium on Irish and Portuguese bonds to record highs and prompting market talk of European Central Bank (ECB) intervention.

Irish opposition parties, eager to force out Prime Minister Brian Cowen’s unpopular administration, rebuffed a call for fiscal unity by visiting European Economic Affairs Commissioner Olli Rehn.

“He asked us our view and I told him […] we had no confidence in this government, and the thing that would give more stability to the country is an election and a government in place that had a significant working majority,” said Michael Noonan, finance spokesman for the centre-right Fine Gael party.

Ireland’s debt burden and budget deficit have been swollen by up to 50 billion euros ($69.57 billion) in liabilities for bank lending guaranteed by the government after a real estate bubble burst in 2008 during the global financial crisis.

Two days before leaders of the G20 major world economies meet in Seoul, Rehn said he was fire-fighting to prevent any potential crisis threatening the stability of the 16-nation single currency area. He appealed for bipartisan support for a 15-billion-euro austerity package over the next four years.

Cowen’s government, which has seen its majority dwindle in parliament and now faces a risky by-election, has yet to spell out details of savage spending cuts and tax increases.

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