Budget to combat northern exodus

Brian Lenihan (right) said he wanted to prevent lost revenue

Duties on petrol and alcohol remain unchanged by the Republic of Ireland's emergency budget to keep shoppers from taking their business over the border.

Hordes of shoppers have been flocking to towns and cities in Northern Ireland to take advantage of weakened sterling.

Minister for Finance Brian Lenihan said petrol and alcohol taxes would remain unchanged because any rise would lead to a loss of revenue.

Cigarettes will go up by 25 cents while diesel will rise by 5 cents per litre.

In his budget last October, Mr Lenihan described the measures as "no less than a call to patriotic action", as shoppers from the Republic continued to travel north to take advantage of the euro's strength.

Thanks to this stronger currency, the border city of Newry in Northern Ireland has attracted headlines across the world as a place seemingly immune from the global recession.

On Tuesday, Mr Lenihan unveiled his second budget in six months to deal with the Republic of Ireland's rapidly contracting economy.

The first lesson is that, if you're lurching further and further into debt, there comes a point when fiscal stimulus isn't very stimulating at all Stephanie Flanders, BBC economics editor Ireland's stimulus plan Irish downturn hits man and beast

The emergency budget includes a large rise in taxes and a cut in spending, to deal with the budget deficit.

Newry Chamber of Commerce president Mary Doran said on Tuesday she did not think the Republic's emergency budget would have any major impact on trade in the city.

"We will still have shoppers coming to avail of the differentiation in VAT, the favourable exchange rate and our better cost of living," she said.

"If the pound strengthens against the euro, I believe we will be able to embrace that - our businesses would be very unwise to base their plans solely on the exchange rate or government policy."

Newry supermarket owner David Downey said business was still strong despite the economic downturn.

"Trade is generally buoyant and we've been very fortunate to be sheltered from this global depression so far - long may it continue," he said.

Fifteen miles away in Dundalk in the Republic of Ireland, businessman Tom McGuinness said the emergency budget was "fairly neutral, business-wise".

"They haven't increased corporation tax or employer's contributions to PRSI, so there isn't anything positive in it for us, but at least it's not damaging," he said.