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Dublin unveils sixth austerity budget

by Conor BARRINS
Shoppers walk along Grafton Street in Dublin. Bailed-out eurozone member Ireland on launched its sixth austerity budget aimed at raising 3.5 billion euros via painful taxation hikes and public spending cuts.

Bailed-out eurozone member Ireland on Wednesday launched its sixth austerity budget aimed at raising 3.5 billion euros via painful taxation hikes and public spending cuts.

Irish Finance Minister Michael Noonan, unveiling his latest budget before parliament, said however that there were clear signs that the worst of the nation's financial crisis was over.

"There are manifest signs that the country is emerging from the worst of the crisis," Noonan told lawmakers.

He added: "The economy grew last year, will grow this year, and will grow again next year. The effort of the Irish people, despite the hardship, was leading to success."

Noonan revealed that the big-spending departments of health and social welfare would bear the brunt of the cuts.

Other austerity measures included higher levies on alcohol and cigarettes, and hikes for motor tax and capital gains tax.

In addition, he confirmed the introduction of a politically sensitive property levy, with an added "mansion tax" for houses valued over one million euros ($1.3 million).

The minister also announced a 10-point tax reform plan to encourage small and medium-sized enterprises, a key driver of employment in Ireland.

However, Noonan repeated his pledge to keep corporation tax -- which is levied on company profits -- at a eurozone low of 12.5 percent, despite international pressure to raise it.

Debt-plagued Ireland was bailed out with an 85-billion-euro EU-IMF rescue package in November 2010 after it was devastated by the global financial crisis and a domestic property market meltdown.

As part of the rescue deal, Ireland agreed to painful austerity measures including spending cutbacks, state asset sales and tax hikes.

This week's budget is the latest aimed at bringing the deficit down to less than the EU ceiling of 3.0 percent of gross domestic product (GDP) by 2015.

Dublin aims to reduce the deficit to 7.5 percent of GDP in 2013. This year, Noonan said it would come in at 8.2 percent, well within the 8.6-percent target set by the bailout programme.

The 2014 deficit target was revised down one tenth of a percentage point to 5.1 percent of GDP, with 2015 estimates remaining unchanged at 2.9 percent.

Dublin's budget comes the same day as Britain, its closest neighbour and largest trading partner, extended its austerity measures by a year to 2018 after announcing its economy was not performing as well as expected.

Ireland has won praise as a "poster boy" of the eurozone crisis on how best to enact convincing reforms to make a return to the markets.

However, official figures released by the Central Statistics Office on Wednesday revealed that Ireland's unemployment rate remains stubbornly high at 14.6 percent in November -- but had eased slightly from 14.7 percent in October.

"The Irish financial crisis could be summarised in one word: debt, national debt and personal debt," Noonan said on Wednesday.

"The government is committed with dealing with both national and personal debt. Continuing to borrow large amounts to fund our day-to-day services is simply not sustainable."

He added: "The reality is that stable public finances are an essential prerequisite to long-term economic growth and job creation.

"We will only be able to successfully access the markets in the long term if the markets believe we've a credible fiscal strategy and agree that our debt is sustainable."

On the eve of the budget, the Department of Finance announced weaker tax revenue growth in the second half of the year continued in November, with tax revenues now 171 million euros behind target for the first 11 months in 2012.