DUBLIN - Ireland's contentious decision to cut the country's minimum wage will save jobs, Prime Minister Brian Cowen insisted Wednesday as he defended his planned austerity measures.
Cowen told the country's parliament that plans to cut the present minimum rate of euro8.65 (US$11.30) per hour by one euro (US$1.30) will help businesses retain staff even as Ireland faces four years of budget cuts and tax rises to fix its ailing economy.
"It's not a question of saving money for the state. The whole idea is to keep as many people in work at a time when the trading environment is very difficult -- we have to try and ensure a competitive economy," Cowen told lawmakers.
Last week, Cowen outlined a four-year program of deep cuts and tax hikes totaling at least euro15 billion (US$20.5 billion), to help bring down Ireland's deficits to the eurozone limit of 3 per cent of GDP from its current postwar European record of 32 per cent.
Ireland's government on Sunday announced it had agreed a deal for up to euro67.5 billion (US$89 billion) in international bailout loans.
Critics of the bailout say the costs of the loans -- which will cost Ireland an average interest rate of 5.8 per cent -- will fall on hard-pressed taxpayers, forcing them to pay for the government's bailout of Ireland's imploded banking sector. The critics have questioned why ordinary people should have to pay billions to rescue greedy banks that ignored risks and plunged into overpriced real estate.
Under the terms of the international deal, Ireland must use euro17.5 billion (US$23 billion) of its own cash and pension reserves to shore up its public finances.
Labour Party leader Eamon Gilmore said a cut to the minimum wage was a "very big price" for the bailout.
"In order to incentivize people on low pay -- or who are poor -- you pay them less, but to incentivize the banks you throw more money at them," he told Cowen.
On Tuesday, Ireland's national soccer team manager Giovanni Trapattoni -- an Italian -- said he would take a cut to his euro1.8 million (US$2.4 million) salary to help out the country's struggling football authority.
Official data released on Wednesday showed Ireland's unemployment rate fell slightly to 13.5 per cent over the last month -- although new job losses are expected as the austerity measures bite. The Central Statistics Office said the number of people claiming unemployment benefits -- which also includes payments to low income workers -- was 425,002, also slightly down on October.
However, the number of benefit claimants had risen 2.8 per cent over the last 12 months.
Opposition legislator Richard Bruton of the Fine Gael party said the fall in benefit claimants since October wasn't news to celebrated but evidence of people were leaving Ireland to find work. Figures show about 65,300 people emigrated in the last year, the highest rate since 1989.
"These people are not leaving (the benefit system) ... to take up new jobs — they are leaving the country," Bruton said.
Investors, however, showed some support for Cowen's plans as yields on Ireland's 10-year bonds eased to 8.942 per cent Wednesday from 9.219 on Tuesday.
