Tomorrow at 15.45 GMT or so the foreign exchange markets will discover whether the negotiations between the Irish government and EU-IMF less than a fortnight ago were worthwhile.
This is because tomorrow is the day of the Irish budget. The nation’s parliament is set to vote whether the planned austerity budget (including €4000 in extra taxes per household) will pass.
If it does then the EU-IMF will pass onto the Irish government the first portion of the €85 billion rescue deal agreed last week. If not then the foreign exchange markets could be thrown into chaos as Ireland plummets toward bankruptcy.
Today the fate of the austerity budget rests in the hands of two independent Irish MPs that usually vote with Brian Cowen’s coalition government. Neither Jackie Healy-Rae nor Michael Lowry have confirmed their support for the budget – though without their votes it could fail.
Furthermore if the budget fails to pass the existing Irish government will automatically fail. Hence the markets are eager to know the results tomorrow.
Peter Lavelle, an Economic Commentator with foreign exchange dealer Pure FX, said ‘The Irish public stand to suffer badly with this austerity budget. But the consequences of not passing the budget and allowing Ireland to slide into insolvency are potentially worse. In addition tomorrow’s budget could have a strong impact on the euro.’
By Chris Doane with foreign currency exchange broker Pure FX.
