Coalition still at odds over €3.1bn target for Budget
FINE Gael and Labour are still divided on the €3.1bn adjustment target with just five weeks to go to the Budget.
The Cabinet discussed the Budget yesterday, with Tanaiste Eamon Gilmore and his ministers adamant that the target has to be reduced due to the €1bn savings achieved in the Anglo promissory note deal.
But Fine Gael is warning of the danger of backing away from the planned spending cuts and tax increases at a time when the country is poised to exit the bailout at the end of the year. And it is still insisting that any extra savings should be put into job creation projects rather than reducing social welfare cuts.
A spokesman for Taoiseach Enda Kenny said there was a need to "hold our nerve".
"There are going to have to be savings made and measures proposed on people who have experienced a huge amount of difficulty already," he said.
However, Labour has taken a much more aggressive stance on softening the Budget, with a spokesman for Tanaiste Eamon Gilmore saying he still believed that the target should be less than €3.1bn.
Labour is keen to reduce the planned €440m of painful social welfare cuts and to protect spending in education, as well as getting funding for "family friendly" policies such as free GP care for children under five.
A Labour source said it was a definite that the final Budget adjustment target would be €3.1bn. "There will be some give, but we don't know how much," the source said.
Fine Gael is aware that Labour has positioned itself publicly as the champion of a less-harsh Budget. But a Fine Gael source said that it was thinking of the "bigger economic situation".
"What's under discussion is a very narrow margin of flexibility," the source said.
The final decision is not expected to be made until later this month when Finance Minister Michael Noonan gets the figures on the economy's performance in the third quarter of the year. Yesterday, he warned Fine Gael and Labour backbenchers to hold their political nerve and "stick with this".
But he insisted there were no divisions between the parties. "Relations are very good. I don't envisage any political problem," he said.
Fianna Fail finance spokesman Michael McGrath said it was essential for the €3.1bn target to be reduced.
"It's difficult to be precise but several hundred million less should still bring us in under our deficit target and reduce the damage to the economy," he said.
Even though most of the bailout funds have been paid over by the troika, the Government is still under an obligation to consult with them before arriving at the final figure. The IMF, European Commission and European Central Bank all want the original €3.1bn target to be met.