DUBLIN — Ireland unveiled the harshest budget measures in its history Wednesday, a four-year plan to slash deficits by €15 billion ($20 billion) so it can receive a massive bailout from the European Union and the International Monetary Fund.
The austerity plan axes thousands of state jobs, trims welfare benefits and pensions, and imposes new taxes on property and water. In all, it seeks to cut €10 billion ($13.3 billion) from spending and raise €5 billion ($6.7 billion) in extra taxes from 2011 to 2014.
Even Prime Minister Brian Cowen conceded the plan would hurt the living standard of everyone in the nation.
Yet analysts still expressed doubts that the EU-IMF rescue loan, which Cowen said would be about €85 billion ($115 billion), would be big enough to save Ireland from an eventual default.
And bank shares plummeted for a third straight day on the Irish Stock Exchange, reflecting growing expectations that investors will be wiped out if the government is forced to seize majority control of the country's two dominant banks, Allied Irish and Bank of Ireland.
"The government is completely in denial about the amount of money they'll have to borrow," said Constantin Gurdgiev, a finance lecturer at Trinity College Dublin and an economics adviser to IBM in Europe.
Ireland is still negotiating the terms of the bailout with European Central Bank and IMF experts. The government hopes its tough budgetary medicine will permit the country's 2014 deficit to fall to 3 percent of gross domestic product, the limit for the 16 nations that use the euro currency.
While most eurozone members are exceeding that rule, Ireland's deficit this year is forecast to reach 32 percent of GDP, a modern European record, fueled by exceptional costs from its unfathomable bank-bailout effort.
"Today is about Ireland putting its best foot forward, Ireland saying: Yes, here is what we're prepared to do as a government and a people to put right what has to be put right, and to give ourselves prospects and prosperity again," said Cowen, who is widely expected to resign or be forced from office within weeks.
Business leaders welcomed the package as brutal but unavoidable given that Ireland is all but frozen out of normal lending markets and its banks are running out of cash.
The EU's financial affairs commissioner, Olli Rehn, said the package "strikes a good balance ... to protecting the least well off." He said Ireland's determination to narrow its deficits quickly provided "a sound basis" for the bailout talks.
But outside the guarded iron gates of Cowen's office, about 100 activists denounced the government and the IMF.
"This is a road map back to the Stone Age," said Jack O'Connor, president of Ireland's largest union, SIPTU.
He noted that Ireland had already suffered nearly €15 billion in cuts and tax hikes since 2008, gutting economic growth and helping to double unemployment to 13.6 percent.
"Ireland needs a strategy for growth, but this plan will achieve the opposite," said O'Connor, who plans to lead a Dublin protest march on Saturday against the cuts.
Fellow Europeans have marveled at how the Irish, despite facing the eurozone's harshest cuts, have responded with only token protests until now. Glum acceptance remained the prevailing mood on Dublin's wintry streets.
"For the next 10 years we're going to be paying for this bailout," said Jordan Lancaster, a 29-year administrator at the Justice Department. "But they had to do it. There really wasn't any other choice."
Ireland's 140-page National Recovery Plan proposes to introduce property and water taxes, raise the sales tax from 21 percent now to 23 percent in 2014, and cut the minimum wage by €1 to €7.65 ($10.20).
Ireland's bloated civil service will be particularly hard hit — seeing cuts of about €1.2 billion and 24,750 state jobs.
Income tax bands will be widened so more lower-paid workers pay taxes, and higher-waged workers will see annual taxes rise more than €3,000 ($4,000). A raft of welfare payments will be gradually reduced.
Young and old alike face higher bills and less income. University fees will rise and monthly pensions will fall up to 12 percent.
Ireland's legendary tax-free status for authors, musicians and artists will be cut back so only the first €40,000 ($53,000) of income will avoid tax.
Left untouched, to the irritation of other EU nations, is Ireland's exceptionally low 12.5 percent tax rate on business profits. That rate is less than half the EU average and has helped to lure about 1,000 high-tech multinationals to Ireland, far more proportionally than any other European country.
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