Irish announce record budget cuts

The Irish Republic faced one of the deepest recessions in the eurozone

Yields on Irish 10-year bonds have reached a new high of 7.62% ahead of a government announcement on plans to cut the deficit.

The bond sell-off reflects increasing scepticism about the Irish Republic’s ability to pay off its debt.

Finance Minister Brian Lenihan will reveal later the scale of spending cuts and tax rises to be announced in December’s budget.

Reports estimate cuts of between 5bn-6bn euros (£4.4bn-£5.3bn) will be made.

Mr Lenihan has taken the step of releasing the figures more than a month early to soothe investor concerns as Irish borrowing costs have hit a new high every day so far this week.

The 10-year yield rose to 7.62% on Thursday, breaking a day-old record of 7.45%.

Mr Lenihan will also put forward growth forecasts for 2011 to 2014.

The Irish deficit is predicted to be the equivalent of 32% of the country’s economic output this year.

It has been pushed up by the cost of government bail-outs of Irish banks. At the end of September, Prime Minister Brian Cowen revealed that taxpayers’ total bill for bailing out the banks could reach 50bn euros.

Mr Cowen has vowed to reduce the deficit to below 3% of gross domestic product (GDP) by 2014 through major spending cuts.

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