The EU Commission has called the Irish government's Four Year Plan a "cornerstone" of the bailout package currently under discussion between Ireland, Europe and the IMF.
Market insiders have called the plan "staggeringly austere" and the proof of their scepticism lies in the fact that bond yields widened further still after the plan was announced. David Begg, head of the Irish Congress of Trade Unions said: "It appears that the day of reckoning has arrived. The Barbarians are at the gates."
The key points of the plan will have already been approved by the EU and IMF. The plan aims to save €15 billion over a four year period. Disciplined implementation of the Four Year Plan will no doubt be a condition of the EU-IMF rescue package. This means that, no matter who is elected next, and no matter what their policies, they are likely to be bound by the plan announced today: Ireland's fiscal path has been fixed for the next four years.
EU economics commissioner Olli Rehn has said that the four-year plan must still be "validated" by the Commission and the European Central Bank. Eurozone finance ministers have said that the plan should be subject to an annual review by the European authorities.
It remains to be seen if the Irish opposition will agree with Irish Prime Minister Brian Cowen when he introduced the plan by saying: "We will do this because we love our country." In the event that they don't like the plan, they may be able to block December's budget. Perhaps, we must hope that the EU and the IMF also love our country.
The National Recovery Plan states, "the Plan will help dispel uncertainty and reinforce the confidence of consumers, businesses and of the international community" but also frankly admits a brutal truth:
"The tax and expenditure measures contained in this Plan will negatively affect the living standards of citizens in the short term."
Cowen however attempted to strike an optimistic note, saying "We are a smart, resilient, proud people and we will come through this."
The markets, however, are sceptical:
Yields of on 10-year Irish Government bonds widened after the announcement, pushing toward 9 percent. Stephen Lewis, chief economist at Monument Securities was reported in the Telegraph as saying: "It doesn't seem all that realistic to me... It seems they're planning very stringent fiscal measures and yet they expect the economy to grow against that background. That seems highly unlikely."
James Nixon, chief European economist at Societe Generale was also reported as saying: "It's a staggeringly austere budget, the cuts are deep and it will hurt. The main thing that stands out is that they still expect the economy to grow by 2.7pc over the next 4 years but it's hard to see how that can be true
You can read the full text of the plan here.
This piece originally appeared on NewsWhip.ie where you can get more details on the story