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Ireland austerity plan: Higher taxes, fewer benefits

By the CNN Wire Staff
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Ireland's austerity plan
  • NEW: Cowen says "It is a challenge that can be surmounted"
  • Ireland is trying to tackle its large national debt
  • Ireland has said it is seeking international help

Dublin, Ireland (CNN) -- The Irish government Wednesday unveiled its four-year plan to cut public spending and increase taxes -- part of the painful measures the country must take to reduce its national debt.

The plan achieves savings through welfare cuts worth 10 billion euros ($13.4 billion) and higher taxes, expected to bring in 5 billion ($6.7 billion), according to the 138-page green booklet titled "National Recovery Plan 2011-2014."

The minimum wage will be reduced by 1 euro ($1.34) to 7.65 ($10.25) an hour, and public sector pay will be reduced by a total of 1.2 billion euros ($1.6 billion) over the four years.

"We are a smart, resilient, proud people and we are going to come through this challenge because we love our country," Irish Prime Minister Brian Cowen said in announcing the plan.

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We are a smart, resilient, proud people, and we are going to come through this challenge because we love our country.
--Irish PM Brian Cowen

"It is a challenge that can be surmounted, and it's one that we must all be determined as a people to overcome."

The cuts follow Ireland's announcement Sunday that it is seeking international financial help to deal with its budget problems.

The rescue package, from the International Monetary Fund and European Union, is estimated at tens of billions of dollars.

Other measures included in the austerity plan are the introduction of water meters by 2014 and increasing the value-added tax (VAT) on goods and services from 21 to 23 percent by 2014.

Cowen said he also wants to boost the amount students must pay for higher education, though he didn't say by how much. A similar move in Britain, designed to reduce its own deficit, has sparked anger and protests by students in recent weeks.

The plan revealed that 45 percent of Irish taxpayers paid no income tax this year, something it said was "not sustainable."

Crucially, the plan calls for keeping the corporate tax rate at 12.5 percent, a way to encourage businesses not to leave the country.

CNN's Jim Boulden in Dublin, Ireland, and Richard Greene in London, England, contributed to this report.