Irish pitches case for faster austerity push

DUBLIN, Oct 5 (Reuters) - Ireland's central bank made the case on Friday for the government to speed up its austerity programme, saying this would encourage a faster recovery in the economy and the jobs market.

Dublin is due to unveil another austerity budget in December, the sixth since the financial crisis began in 2008.

It will raise taxes and cut spending under a 3.5 billion euro ($4.55 billion) package, and has signalled a further 5.1 billion euros of deficit reductions over the following two years.

In its regular quarterly report - in which it also cut growth forecasts a touch - the central bank said Ireland's success in so far meeting the targets under its EU/IMF bailout means it does not need to increase the scale of the cutbacks.

But accelerating the pace of the austerity could be beneficial.

"Meeting these targets has helped Ireland to go some way towards re-establishing its reputation for credible policymaking and, in turn, has contributed significantly to lowering Irish bond yields," the central bank said in the quarterly bulletin.

"...(But) there is a case for getting the adjustment over more quickly. This would shorten the already lengthy period of uncertainty which has been bad in itself and has doubtless slowed investment and other spending plans."

Irish consumer confidence dropped sharply from a five-year high in September as the government began debating its latest austerity budget.

The central bank cut its forecast for 2012 gross domestic product growth to 0.5 percent from the 0.7 percent it estimated three months ago.

It lowered next year's forecast to 1.7 percent from 1.9 percent, adding that it will therefore likely be next year before employment growth emerges.

The bank expects the unemployment rate, among the highest in Europe, to fall only marginally next year to 14.5 percent from 14.8 percent this year.

While some of the competitiveness lost during Ireland's 'Celtic Tiger' boom years had been regained, pay rates remained high, "no doubt discouraging expansion and investment projects by exporting firms."

($1 = 0.7689 euros)

(Reporting by Padraic Halpin; Editing by John Stonestreet)

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