Ireland unveils austerity plan

IRELAND: Ireland unveiled a 15-billion-euro austerity package Wednesday required to unlock an international bailout, slashing public sector pay and pensions but refusing to raise corporation tax.

With the eyes of Europe on his debt-ridden nation, Prime Minister Brian Cowen said his four-year package of cuts and tax increases would restore shattered confidence, calling it a signpost on the road to recovery.

"We can and we will pull through this as we have in the past," Cowen told a news conference.

"We are a smart, resilient, proud people and we are going to come through this challenge because we love our country."

The 20-billion-dollar plan, to be followed by a budget on December 7, is an essential step towards Ireland receiving a bailout of up to 85 billion euros (114 billion dollars) from the European Union and the International Monetary Fund.

The aim is to slash the public deficit to below three percent of gross domestic product, in line with EU rules, after it ballooned to 32 percent of GDP this year.

Among the key points of the package, sales tax will be raised to 23 percent from 21 percent by 2014, but the 12.5-percent corporation tax rate a key attraction for foreign companies to invest in Ireland will be maintained.

The government said it expected unemployment to be brought below 10 percent by 2014, from its current level of over 13 percent.

The minimum wage will be cut by one euro to 7.65 euros an hour, but the Government said it would still be one of the highest rates in the EU.

The EU's economic commissioner Olli Rehn said the package was "a sound basis for the negotiations" on the international bailout.

As Ireland strove to prove it was trying to get its house in order, another heavily-indebted eurozone country, Portugal, was paralysed by a general strike on Wednesday called to protest against deep spending cuts.

The EU fears Portugal will be the next eurozone nation to require a bailout after Greece and Ireland.

Chancellor Angela Merkel said Germany was prepared to help Ireland, but its support was conditional on Dublin "making clear what steps (it) must take to get back on a path of stabilisation". Dublin, Thursday, AFP