Irish Government Draws Fire as Budget Plan Shown to Germany

Ireland’s government laid out plans to raise sales tax and pledged to consider “ambitious” asset sales in documents shown to lawmakers in Germany before their Irish counterparts, drawing criticism from opposition politicians in Dublin.

The draft documents, provided to the German parliament’s budget committee by Chancellor Angela Merkel’s government and obtained by Bloomberg News, detail a proposed increase in value- added sales tax next year to 23 percent from 21 percent. The document is prefaced with an unsigned “Letter of Intent” from Irish Finance Minister Michael Noonan and Irish Central Bank Governor Patrick Honohan to European officials.

The German government in September pledged to better inform parliament of crisis policy following a court ruling upholding the chamber’s primacy in budget matters. The disclosure before the Dec. 6 budget is “deeply embarrassing” for the government, Sinn Fein lawmaker Pearse Doherty said today.

The European Commission said today in a statement it is obliged to report to European governments on its quarterly review of the Irish bailout. What happened to the “leaked documents” after going to the German budget committee is the “sole responsibility of the German authorities,” it said.

‘Classified’

“These documents were marked off as ‘classified’,” German Finance Ministry spokesman Martin Kotthaus told reporters today in Berlin. Germany’s budget committee received the documents on Ireland as part of a legal process that requires the government to inform lawmakers of bailout programs, he said.

“It would be a staggering and unprecedented breach of faith with the Irish parliament and Irish people” if budget details have been provided to German lawmakers, Michael McGrath, finance spokesman for Ireland’s largest opposition party, Fianna Fail, said in an e-mailed statement. “It would represent a fundamental breach of established protocols in relation to the disclosure of budgetary measures.”

Noonan has said he’ll seek savings of 3.8 billion euros ($5.1 billion) next year. The government is targeting 1.6 billion euros in additional revenue next year and 2.2 billion euros in spending cuts.

Bailout

Ireland sought an international bailout in November 2010 when its banking crisis became too big to handle alone, and has pledged to narrow the fiscal deficit to 8.6 percent of gross domestic product in 2012.

In the documents, the government proposes cutting day-to- day spending by 1.45 billion euros and reducing capital spending by 750 million euros. Increasing sales tax will generate 670 million euros, while a new household charge would raise 160 million euros.

The government said it “stands ready to take any corrective action that may become appropriate” to meet the objectives of its aid plan. It said it will discuss a list of state assets to be sold with the so-called troika of the EC, the IMF and the ECB by the year end, before taking final decisions of what will be disposed of.

“The budgetary measures are currently being considered,” a spokesman for Noonan said in a statement yesterday. “No decisions have been taken.”

Irish Public Expenditure Minister Brendan Howlin said the government “would be deeply concerned” if documents were leaked.

To contact the reporters on this story: Finbarr Flynn at fflynn3@bloomberg.net; Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

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