Menu

Ireland's deficit-cutting budget passes key test

Ireland's embattled minority government won a preliminary vote Wednesday on a deficit-cutting budget designed to comply with requirements for a massive international bailout, and the governing Fianna Fail party elected a new leader.

The Finance Bill passed its second stage on a vote of 80 to 77 in Ireland's lower house of parliament after two independent lawmakers agreed to back Prime Minister Brian Cowen's government. Finance Minister Brian Lenihan promised to slap a tax on bankers' bonuses at a later stage for the bill — a concession sought by the two lawmakers.

The bill is expected to pass its final stage in the lower house on Thursday before being sent to the upper house over the weekend.

Cowen resigned as leader of the Fianna Fail party on Saturday and the party chose former Foreign Minister Micheal Martin as its new leader on Wednesday.

Martin, 50, was among the ministers who deserted Cowen's cabinet in recent days. He has held several government posts, including education and health, and led the drive for Ireland's pioneering ban on smoking in public places.

Fianna Fail won Ireland's last six elections dating to 1987 but the party has fallen to record low levels of support after Cowen led Ireland from the Celtic Tiger boom to the edge of bankruptcy.

Ireland's two major opposition parties, Fine Gael and Labour, have threatened to force a no-confidence vote in parliament this week against Cowen to speed up early elections he has set for March 11. Polls suggest Fianna Fail is headed for an electoral disaster.

Ireland's government has been heading for collapse since November, when Cowen was forced to take euro67.5 billion ($91 billion) bailout loan from the European Union and the International Monetary Fund to prevent the country from going bankrupt.

Under the deal, Ireland must slash euro15 billion ($20 billion) from its deficit spending over the coming four years and is imposing the harshest cuts this year. The parliament has already approved bills to slash welfare benefits and the minimum wage, raise school fees and cut the salaries of Cabinet ministers. But the toughest measures — increasing income taxes across the 2 million-strong work force, raising effective tax levels to 41 percent or more — are in the Finance Bill.

The collapse of Ireland's government reflects a wider debt crisis in Europe: Greece required a bailout before Ireland did and many analysts predict Portugal will be next. Nations across the continent are imposing painful cuts to claw back deficits.