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Ireland might not get 'bounce' after recession says IMF

SENIOR Irish bankers should incur a higher tax on their pay while ordinary homeowners should receive assistance in paying their debts, according to the International Monetary Fund (IMF).

In a downbeat assessment of the Irish economy, the IMF has outlined that Ireland might not enjoy an expected "bounce-back" after the recession.

And it has been revealed that the Government has agreed that a property tax would be a good way to make public finances stable in a new report from the Washington-based fund.

The Government told the IMF a flat-rate tax on property was under consideration.

The IMF in turn has recommended that the State should introduce a higher tax on senior bankers' pay and bank profits in an attempt to reduce the risks the financial sector poses.

The IMF's review is based on its increased growth forecast for 2011 and now expects GDP to increase by 2.3pc, compared with an April projection for GDP to grow by 1.9pc.

It expects the economy to grow by 2.5pc in 2012.

However, the forecasts remain well below the Government's expectations of 3.3pc growth next year.

"The normally sharp bounce back after a large output decline will be muted," the IMF says in the case of Ireland.

Finance Minister Brian Lenihan has insisted the IMF report showed the Government was taking the right moves to support the banks and tackle the deficit.

But Fine Gael enterprise spokesman Richard Bruton described the IMF findings as "very downbeat".

The IMF took into account that the Irish economy emerged strongly from recession in the first quarter, with a surge in exports pushing GDP up by 2.7pc from the fourth quarter of last year, which was the strongest performance in the European Union.

However, the IMF doesn't believe that this growth will be sustained, and expects the economy to contract by 0.5pc in 2010.

"The growth numbers for the first quarter of 2010 look very good," said Ashoka Mody, the IMF's mission chief for Ireland.

"On that basis, a number of commentators have revised their short-term growth outlook upwards. However, we are somewhat more cautious," he added.

"It's not yet clear that these short-term developments are on a sustainable footing."