Ireland Doesn't Plan Tax Increase as Economy Slows, Harney Says

By Louisa Nesbitt

Aug. 6 (Bloomberg) -- Ireland doesn't plan to raise taxes even as economic growth slows and the country's budget deficit increases, according to Health Minister Mary Harney.

``Clearly the last thing we need is a knee-jerk reaction,'' Harney said in an interview on Ireland's RTE radio today. ``The last thing we need in this economy is to increase taxes and to go on what I call a spending, borrowing and taxing spree.''

A housing slump and slower economic growth contributed to Ireland's budget deficit widening to 6.7 billion euros ($10.4 billion) in the first seven months of the year, more than five times the year-earlier deficit of 1.3 billion euros, the Finance Ministry said yesterday. The country may enter a recession in 2008 for the first time in more than two decades, according to the Economic and Social Research Institute.

Ireland's deficit will expand to 2.75 percent of gross domestic product this year, close to the European Union limit of 3 percent of GDP, the government forecast last month. Goodbody Stockbrokers economist Dermot O'Leary said in a research note today that the nation is likely to breach the EU limit.

The government wants most agencies under its control to reduce their wage bill by 3 percent as part of a plan to save 1.4 billion euros by the end of 2009, Finance Minister Brian Lenihan said last month.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net