FRANKFURT (MNI) – The disbursement of payments to Ireland from its
European partners will depend on Ireland passing its 2011 budget,
according to a memorandum of understanding (MOU) between Ireland and its
soon-to-be creditors, released Wednesday.

“The release of the first installments will be conditional on the
successful adoption of Budget 2011 as described in the Memorandum of
Economic and Financial Policies and this MoU,” the document said. It was
released on the website of the Irish Finance Ministry as part of a
broader document outlining the context and details of the EU/IMF
financial aid package for the former Celtic tiger.

The Irish budget will be voted on next week, and recent political
maneuvering along with a bi-election in Ireland has left the government
perilously close to the possibility of losing the budget vote. They are
now dependent on the vote of two independents, or abstentions by
opposition members, in order to pass the budget. The two independent
members of parliament have already hinted that they may not support the
bill.

The memorandum also gives quarter-by-quarter targets which will
have to be met by the government in order for funds from the European
Financial Stabilization Mechanism, the European Financial Stability
Facility and bilateral loans by UK, Sweden and Denmark to be released.

“Prior to the release of the installments, the authorities shall
provide a compliance report on the fulfillment of the conditionality,”
the document said.

For 2011, the memorandum spells out targets the government has to
meet by the time each quarterly review takes place.

In the first quarter, the government is to introduce measures
leading to no less than E2 billion a year in additional tax revenues.
The government is expected to attain this goal via lower income tax
bands and credits as well as by cutting pension tax reliefs. In
addition, Irish authorities will describe one-off and other measures
that will lead to at least E700 million next year.

On the expenditure side, at least E2 billion in cuts are to be
implemented next year, flanked by a E1.8 billion reduction in capital
spending, according to the memorandum.

“If targets are [expected to be] missed, additional action will be
taken,” the MoU said.

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