Inflation hits Irish budget

Charlie McCreevy: Views "in line with" those of the prime minister

Irish prime minister Bertie Ahern has the support of his finance chief for a tightening in the tax cutting policy which has helped Ireland become the European Union's fastest growing economy.

Mr Ahern, responding to concerns over Irish inflation running at almost three times the EU average, told reporters in New York on Thursday that cuts in income tax announced in December's Budget may need to be limited.

The views of Ireland's finance minister, Charlie McCreevy, who will in December unveil Ireland's 2000 Budget, are "in line" with those of Mr Ahern, a spokesman told BBC News Online on Friday.

Mr McCreevy is not expected to make any statements himself on the proposed cuts while at a meeting of eurozone finance ministers in Paris, the spokesman said.

ECB chief urges caution

Mr Ahern's comments followed a warning from Wim Duisenberg, chairman of the European Central Bank, of the effects of generous tax cuts on Irish inflation, which is set to reach 7% this year.

Bertie Ahern addressing the UN on Wednesday

"`You have to keep on looking at how you can help people that are in need," said Mr Ahern, in New York for the UN Millennium Meeting .

"So limited [tax cuts] for some people might be possible, but limited cuts for everyone may not be the best policy."

Further pressure to curb tax cuts has come from the International Monetary Fund, which in August recommended a policy of fiscal tightening to dampen demand and curb inflation.

Domestic pressure

But Mr Ahern faces pressure at home to continue the tax-cutting programme which has helped Ireland earn the tag 'the Celtic Tiger' because of its booming economy. The government predicts economic growth of more than 10% this year.

Government coffers are overflowing, with latest figures showing a surplus of 4.4bn euros, and Ireland's coalition government has committed itself to further tax cuts.

Mr Ahern used the New York summit to announce on Wednesday that Ireland's aid to the underdeveloped world by 2007 quadruple to the equivalent of 0.7% of GNP, meeting a UN target.