Wednesday 16 October 2019

Budget paralysis as we brace for Brexit impact

  • Crash-out fear: €1.2bn package aimed at providing soft landing

  • Set to plunge the country's finances back into deficit by borrowing €650m if necessary

  • No money for income tax cuts or pension increases next year

'Paschal is playing complete hardball with everybody'. Photo: Gareth Chaney, Collins
'Paschal is playing complete hardball with everybody'. Photo: Gareth Chaney, Collins
Kevin Doyle

Kevin Doyle

The "shadow of Brexit" has stopped Finance Minister Paschal Donohoe from giving anything back to hard-pressed workers in Budget 2020.

As talks aimed at securing a deal veered toward collapse in Brussels, Mr Donohoe announced a €1.2bn package aimed at providing a soft landing for a hard Brexit.

He will plunge the country's finances back into deficit by borrowing €650m if necessary.

Shortly after the Budget speech, Taoiseach Leo Varadkar was on the phone to UK Prime Minister Boris Johnson in a last-ditch bid to salvage the talks.

No progress was made during a "detailed" 45-minute discussion - but the two leaders will meet by the end of the week if talks aren't abandoned before then. Last night, Downing Street sources claimed the EU had "24 hours to find a compromise" or the talks would collapse.

The reality of Brexit hit home as Mr Donohoe admitted there was no money for income tax cuts or pension increases next year.

In fact, the majority of workers are set to pay more income tax in the coming year due to pay rises.

As Brexit negotiations teetered on a knife edge last night, Tánaiste Simon Coveney flew to Brussels.

After a meeting with the EU’s chief negotiator Michel Barnier, Mr Coveney admitted there was a “real gap” between the EU and UK.

“There are some in the UK who seem to be planning for a general election ahead of trying to plan to get a deal in the context of some of the pressure that has been put on and some of the commentary we have seen over the past 24 hours,” Mr Coveney said.

Big winner: Green policies have been adopted by the Government, which will benefit the Green Party. Photo: Lorraine O’Sullivan
Big winner: Green policies have been adopted by the Government, which will benefit the Green Party. Photo: Lorraine O’Sullivan

This was a reference to briefings from Downing Street which claimed the Taoiseach “doesn’t want to negotiate”.

The ‘Spectator’ magazine, which is closely linked to the Conservative Party, reported sources as saying: “Varadkar has also gone back on his commitments – he said if we moved on manufactured goods then he would also move but instead he just attacked us publicly.”

They said Mr Varadkar was seeking to “gamble on a second referendum” and was encouraging Mr Barnier “to stick to the line that the UK cannot leave the EU without leaving Northern Ireland behind”.

Speaking on RTÉ News last night, Mr Varadkar said: “I don’t play dirty. I don’t think most EU leaders do either. We’ve been very straight up.”

He said Ireland wanted a deal but “not at any cost”.

“I think it’s going to be very difficult to secure an agreement by next week, quite frankly.”

Ring of steel: Gardaí monitor the crowd as Extinction Rebellion demonstrators lie and sit outside Government Buildings on Budget Day in Dublin yesterday.
Ring of steel: Gardaí monitor the crowd as Extinction Rebellion demonstrators lie and sit outside Government Buildings on Budget Day in Dublin yesterday.

The Taoiseach said the UK had reneged on commitments made to Northern Ireland and then “put half of that back on the deal and said that’s a concession, which it isn’t really”.

The latest Brexit acrimony began when Mr Johnson engaged in a frank telephone conversation with German Chancellor Angela Merkel.

A Downing Street source said Ms Merkel had told the prime minister that “a deal is overwhelmingly unlikely” unless the UK agreed to let Northern Ireland continue to follow EU customs rules in order to maintain an open Border on this island.

The unnamed source said that on the basis of the German argument “a deal is essentially impossible not just now but ever”.

However, European Council President Donald Tusk issued a testy tweet in which he said: “Boris Johnson, what’s at stake is not winning some stupid blame game.

“At stake is the future of Europe and the UK as well as the security and interests of our people. You don’t want a deal, you don’t want an extension, you don’t want to revoke, quo vadis?”

The final phase is Latin for ‘where are you going?’

The phone call between Mr Varadkar and Mr Johnson was described by Irish sources as “a good discussion on the state of play”.

Sources told the Irish Independent that both men promised to try to get a deal over the line.

No location or time has been agreed for a meeting but if there is still scope for progress, the pair will hold further discussions tomorrow or Friday.

In his Budget speech, Mr Donohoe said that his announcement was being made at a time “without precedent”.

“This is a Budget that has been developed in the shadow of Brexit.

“And the context for Brexit has now shifted to no deal as our central assumption,” he said.

Meanwhile, the value of sterling plunged again yesterday on the news that Brexit talks were close to breaking down.

The currency touched a one-month low against the euro.

Irish Independent

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