THE Government is to be put under pressure to increase already-brutal Budget cuts, so Ireland can put as much distance as possible between itself and crisis-ridden Greece.
Sources close to Ireland's IMF-European bailout team yesterday confirmed that the Government will be "encouraged" to take as many cuts and tax increases as possible in the December Budget -- potentially pushing the savings beyond the €4bn mooted by Finance Minister Michael Noonan earlier this week.
Speaking in Frankfurt yesterday, ECB president Jean- Claude Trichet stressed the importance of "front loading" the austerity programme.
The Fine Gael/Labour coalition is likely to be asked to consider selling state assets sooner rather than later so that Ireland's finance can be improved quickly and Ireland can be distanced between Greece.
The bailout team has not yet decided on whether €4bn is the maximum that can be extracted from 2012's Budget. If the bailout team believes higher savings can be made it will push for a "more ambitious" Budget.
Sources stressed that any early savings made in 2012 would be compensated for by a softer Budget in 2013, so the overall impact on jobs and consumer spending will be the same.
Now is also seen as a good time to make extra cuts because Ireland's exports are strong, so the country has healthy income from that area.
The desirability of accelerating the austerity programme is likely to be broached at this week's review mission as high-level delegates from the European Central Bank, the European Commission and the International Monetary Fund assess Ireland's economic progress.
But serious efforts to push for bigger savings are unlikely to be made until the autumn.
Mr Noonan has already hinted that this year's budget could take as much as €4bn out of the economy -- higher than the €3.6bn adjustment originally agreed with the bailout partners.
Mr Trichet yesterday said he was "sending the message without exception" that countries should try to be "ahead of the curve" in improving their finances.
A spokesman for the Department of Finance declined to be drawn on the prospect of even higher budget cuts for 2012, stressing that budget decisions will be made closer to the time.
Mr Trichet yesterday said that countries who achieved more than what they had promised in their bailout deals would be rewarded with "more growth and job creation".
Some members of the bailout teams have previously suggested the interest rate bailed out countries pay should be linked to their progress, so that countries that overshoot their targets would pay lower interest rates.
It is understood that this area is unlikely to be actively discussed at the July mission.
Mr Trichet yesterday heaped praise on Ireland's efforts so far, saying the country had done "incredibly good work" to regain the competitiveness lost during the boom years.
"The flexibility of the economy, the way Ireland got back to competitiveness is remarkable," he said.