Irish lawmakers approve tax hikes in tough budget

DUBLIN - Lawmakers narrowly approved tax hikes Tuesday as part of Ireland's most brutal budget in history, a 6 billion euro ($8 billion) slash-and-tax plan imposed as a key condition of the nation's international bailout.

A rejection of the 2011 budget would have forced Prime Minister Brian Cowen's resignation and snap elections - and raised doubts about whether Ireland could tap aid worth 67.5 billion euro ($90 billion) from the European Union and the International Monetary Fund.

But Cowen survived thanks to an 82-77 vote in favor of hikes in taxes on vehicle fuel.

The complex budget faces several more parliamentary tests between now and February, with at least three separate votes for major bills on welfare cuts, sweeping expansion of the income-tax net, and other measures.

Unveiling the budget, Finance Minister Brian Lenihan said every household in this country of 4.5 million must take hits on their net incomes to close Ireland's staggering deficit.

Lenihan said Ireland had no choice but to slash spending and raise taxes immediately because the country this year is spending more than 50 billion euros on daily government activities and has committed at least 45 billion euros more to bail out its banks - yet is collecting just 31 billion euros this year in taxes.

The result has been an underlying deficit this year of 11.6 percent of Ireland's gross domestic product, second-worst in the 16-nation eurozone to fellow aid recipient Greece.

When exceptional bank-bailout costs are included, as European Union authorities have required, Ireland's 2010 deficit skyrockets to a modern European record of 32 percent of GDP.

Lenihan's plan - the harshest yet of four emergency budgets unveiled since 2008 - contains 4.5 billion euros ($6 billion) in spending cuts and 1.5 billion euros ($2 billion) in tax rises. A potential further 9 billion euros ($12 billion) in cuts and tax hikes loom for 2012-14.

As Lenihan spoke to the lawmakers, several hundred left-wing protesters outside the wrought-iron parliament gates endured icy weather to denounce the cuts as likely to hit the poorest citizens the hardest.

Some banged drums, blew whistles, clanked cattle bells and tooted horns.

Many more waved placards demanding that Ireland's state-aided banks default on their hundreds of billions in debts to foreign banks - a notion that Lenihan dismissed as economically suicidal.