Irish Finance Minister Brian Lenihan said the public had made a "massive commitment" to the banking sector, adding: "I am determined that there will be a return to the taxpayers in the form of credit which supports healthy Irish businesses and jobs."
Ireland nationalised the Anglo-Irish Bank earlier this year and has pumped capital into two major retail banks – Bank of Ireland and Allied Irish Banks – to shore up their balance sheets. The government is also establishing a 'bad bank' to buy up property-backed loans from major financial institutions in Ireland.
Lenihan said the new "credit review system" will have the power to make banks lend to viable small and medium-sized enterprises (SMEs) to address the ongoing problem of accessing finance. Businesses will be able to seek an independent review of banks' decisions to refuse credit applications.
"My aim is to have a simple, effective appeals process, run by people with experience and credibility. The banks must comply with the recommendations of the appeal process, or explain satisfactorily why they cannot do so," he said.
The scheme will pay particular attention to the retail sector, including car dealerships, tourism and agriculture.
Budget makes necessary cuts
The budget, seen as the toughest for generations, includes €4 billion of savings, €1 billion of which will come from slashing the public pay bill. Social welfare payments have also been cut and a new carbon tax will be introduced.
There will be incentives to buy plug-in hybrid electric vehicles, a reduction in VAT, reduced taxes on alcohol, and cheap train fares for tourists aged over 66.
"I do think we are on the road to recovery. This will be a very difficult budget but it is a budget that will be a turning point for our public finances," Lenihan said.
The budget was criticised by unions and opposition parties, who said the austere plan lacked any real stimulus measures aimed at creating jobs. However, international observers welcomed the fact that Ireland is working to rein in its growing budget deficit.
"Ireland is an example of what Greece should be doing really. It looks like there will be very aggressive measures coming out [of the budget]. I think with Ireland we take some reassurance from that at this point," said Paul Rawkins, senior director of sovereign ratings at Fitch Ratings.
