A time of austerity in Ireland now and coming to the UK vey soon

The credit crunch has had a serious impact on public finances right across the globe. In response to their deteriorating budget position the Irish Finance Minister Brian Lenihan unveiled a series of tough measures designed to bring the Country's budget deficit back under some kind of control. The fiscal moves included sharply higher income taxes, higher rates of Capital Gains Tax and Capital Acquisitions Tax, rises in excise duties on cigarettes and size able cuts in unemployment benefit. In terms of the economy he had a gloomy forecast with output expected to contract by 8% this year. What is happening in Ireland now could soon move onto the UK in a year or so. The UK's fiscal position has also deteriorated badly in the wake of falling revenue (due to lower incomes and profits) and rising expenditure (the bailouts and higher benefits). So it is likely that just as the UK is coming out of recession in 2010 there will be the need to raise taxes and slash government spending. This could act to halt any recovery that is starting to show at that time. No wonder that the stock market remains very nervous. If investors expect 2010 to be the start of another period of rising economic activity with higher corporate profits and dividends they might well be disappointed.