DUBLIN — Ireland's newly elected prime minister, Enda Kenny, devoted his first full day on the job Thursday to lobbying the European Commission for a better bailout deal — and cutting his Cabinet ministers' salaries.
Kenny was elected Wednesday atop a coalition government committed to reducing the cost of November's European Union-International Monetary Fund rescue deal for Ireland. Ireland's previous government negotiated an emergency loan after being overwhelmed by its own bank-bailout program.
Kenny prepared to meet Commission President Jose Manuel Barroso Barroso in advance of Friday's summit of the 27-nation union. It is focusing on the continuing eurozone debt crisis that has already forced Ireland and Greece to take EU-IMF loans and looks increasingly likely to claim Portugal next.
Before flying to Brussels, Kenny ordered his new Cabinet to show a commitment to austerity by cutting their salaries and traveling together in a minibus — instead of the usual convoy of black Mercedes limos — to receive their seals of office.
The coalition of Kenny's conservative Fine Gael and left-wing Labour — the twin victors of Ireland's Feb. 25 election — is committed to slashing Ireland's deficits back to the eurozone limit of 3 percent of GDP by 2015. They have pledged to impose €3 billion ($4.18 billion) in 2012 cuts and tax hikes on top of the €6 billion already enacted this year by the ousted government of Bran Cowen.
Ireland's public has suffered three years of falling incomes, lost jobs, mortgage hikes — and now, rising prices.
The Central Statistics Office reported Thursday that annual inflation last month reached 2.2 percent, the highest mark since November 2008. Average prices had declined through all of 2009 and most of 2010 in line with Ireland's worst recession since the 1930s, but EU-wide surveys still record Ireland as the bloc's most expensive country for many goods and services.
In his first act as government leader, Kenny cut the pay of the entire 15-member Cabinet, including his own, by 6.6 percent.
His salary fell to €200,000 ($276,500). Labour leader Eamon Gilmore — the deputy prime minister as well as Ireland's new minister of foreign affairs and trade — will get €184,405 ($255,000), other Cabinet ministers €169,275 ($234,000).
Kenny said he gave his Cabinet two weeks to suggest ways of minimizing use of the Mercedes fleet, a luxury that has attracted particular voter anger.
One of Ireland's most prominent businessmen, former EU commissioner Peter Sutherland, called on European donors to cut the interest rates they are charging Ireland. The potential €67.5 billion ($93 billion) credit line commands an average interest rate of 5.8 percent, about 3 points higher than the EU's own funding costs.
Sutherland, writing in The Financial Times newspaper, conceded that countries such as Ireland must suffer "some penalty" for breaching the eurozone's deficit-spending rules. But he said the 5.8 percent interest rate represented "an unduly punitive sanction." He described the gap between the EU donors' costs and the price they were charging Ireland "exorbitant" and "likely to exacerbate" Ireland's funding problems.
Dublin-born Sutherland was Ireland's attorney general in Fine Gael-led governments in 1981-84. He was European commissioner for competition in 1985-89, then director-general of the World Trade Organization in 1993-95. Today he is chairman of Goldman Sachs International.
So far Ireland has drawn down about €20 billion in EU-IMF funds to cover government bills and the estimated €50 billion cost of sustaining five largely state-owned Dublin banks. Those banks faced imminent collapse in 2008 when Ireland's grossly overinflated property market went into meltdown as the global credit crisis struck.
Cowen's government responded by insuring all the banks' deposits and debt obligations to bondholders, then nationalizing most of the banks anyway because foreign investors refused to resume lending money to the banks. The state guarantee put the taxpayer on the hook for repaying bondholders, who normally suffer losses when businesses fail.
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