Coalition gives EU budget outline for approval

The Government has submitted an outline of next week’s budget to the EU authorities for their informal approval before the package is finalised by the Cabinet and unveiled in the Dáil.

Top-level Irish officials travelled over the weekend to Brussels to discuss the fiscal plan with counterparts who work for economics commissioner Olli Rehn.

The two groups were to meet yesterday evening and are due to gather again today, it is understood from well-placed sources.

The leadership of the Coalition has resolved to retrench by less than the €3.1 billion sought by the troika, which comprises the European Commission, the European Central Bank and the International Monetary Fund (IMF).

While the IMF signalled tacit support last week for an easing of the €3.1 billion target, the European bodies have yet to move. However, the Government is working on the basis that they will also give their blessing to the plan.

Weakness
The objective of the Brussels talks is to run the draft plan past EU officials to identify any weakness and settle any conflict before the final decision is made.

Participants believe this should avoid potential for any problem emerging at the European level after the plan goes to the Dáil on October 15th.

The engagement with EU officials comes before Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin present a joint memorandum to the Cabinet tomorrow on the fiscal framework for the budget.

This document sets out the parameters for the 2014 plan, including key targets for spending cutbacks, tax increases and the overall economic assumptions underpinning the plan.

The basic proposal was signed off last week by the Economic Management Council, the powerful Cabinet committee at which Taoiseach Enda Kenny and Tánaiste Eamon Gilmore settle the central thrust of fiscal policy with Mr Noonan and Mr Howlin.

While the plan embraces an retrenchment target below €3 billion, the Government resolved not to make the overall figure public before bringing it to officials in Brussels.

Final discussions
As preparations for budget day intensify, tomorrow's meeting of the Cabinet is likely to be the first of two this week. Only after the overall adjustment target is set will final discussions take place with Ministers in big-spending departments such as health, social protection and education.

Although the move to ease the €3.1 billion target has lifted some of the strain on the Coalition, the extent to which the benefit of the reduction is used to ease the brunt of cutbacks in individual departments remains unresolved.

An emerging focus in the negotiation is to protect funding for frontline health and education services, something that threatens the campaign of Minister for Social Protection Joan Burton to push back against demands for welfare cuts of €440 million.

Budget 2014 is hugely important for the Government and its international sponsors in light of the ongoing drive to exit the international bailout in December and return to full market financing next year.

Ireland will be the first bailout recipient in the euro zone to leave its rescue programme, so all sides have an entrenched interest in securing a smooth exit.