Plans to frontload €6 billion of the four-year €15 billion budget deficit reduction target have been seen internationally as a last-ditch attempt by the Government to restore confidence in the economy.
Reports of the sum outlined yesterday by Minister for Finance Brian Lenihan made the pages of a host of international newspapers, with the Wall Street Journal, New York Times and Financial Times showing significant interest.
The Wall Street Journal said Ireland is running out of road having done "everything the market could have expected to shore up both its banks and its own finances".
"[Ireland] has followed the austerity prescription from Europe's policy mavens to the letter," it said. "But the bond market, the target audience for its efforts, seemingly doesn't want to know."
The Wall Street Journal said Ireland had time on its side, but not much, and would have to have passed a credible budget, definitively capped the bank losses and provided evidence the current export recovery is sustainable before it returns to the borrowing market early next year.
However, it said seeking funding from the European Union would make little difference as any fiscal programme would unlikely be harsher than what has been proposed. "But it would be a bitter blow to Irish pride – and euro zone credibility," it concluded.
The Financial Times said the "embattled Fianna Fail government" had introduced cuts "twice as savage as originally envisaged" as it seeks to reassure debt markets its fiscal reduction plan is on track.
"The decision to release headline figures ahead of Budget day is aimed at calming market nerves as Ireland's cost of borrowing hit fresh highs on Thursday amid worries the scale of the adjustment and the related bank bail-out costs could force Dublin into a sovereign bond default," the FT said.
FT columnist Aline van Duyn was a little more positive, suggesting that by the time Ireland returns to the bond market things "may well have settled down".
The New York Times said the Irish government had made the €6billion in its latest step to salvage its fiscal credibility. However, it said the proposal was unlikely to generate much confidence at this stage.
"Without more details on how it plans to make these savings, investors are likely to remain sceptical," it said. "Weighed down by three years of a shrinking economy, the government of Brian Cowen, the prime minister, has reached a political nadir, with many people expecting an early election - a process that further complicates the deficit-cutting agenda."
The Times of London said the State was facing its toughest budget history as it "seeks to convince international investors it is not heading for a Greek-style financial crisis".
