Main Irish opposition set to allow budget to pass

By Padraic Halpin DUBLIN (Reuters) - Ireland's main opposition party, whose agreement is needed for next week's budget to get through parliament, believes it will pass, its finance spokesman said on Friday. Prime Minister Enda Kenny's Fine Gael party returned to power in May in a minority administration with independent lawmakers but currently has to rely on an agreement with its biggest rival, Fianna Fail, to abstain on key votes. "There shouldn't be any last-minute obstacles to an overall agreement. I believe the budget will pass," Fianna Fail finance spokesman Michael McGrath, who has been conducting budget negotiations with Finance Minister Michael Noonan, told Reuters. "From a Fianna Fail perspective, the tax side is more or less settled. The expenditure side is certainly more challenging but I expect that there will be an agreement." McGrath said he expected his party to abstain on the key legislation underpinning the budget in coming weeks but it might vote in favour of some measures that go to a vote on Tuesday, such as a likely increase in the excise tax on tobacco. As well as a planned modest package of tax cuts and spending increases, the government has promised measures to "Brexit-proof" the recovering economy from the knock-on effects of its key trading partner's decision to leave the EU. McGrath said these should include the retention of the lower VAT rate for the tourism sector and a cut to the rate of capital gains tax for entrepreneurs. Despite state aid concerns, exporters could be offered a preferential exchange rate via a national hedging strategy. "There isn't any single initiative from government that can entirely insulate the exporting SME sector but it is vital to give the business community confidence that there is a plan to manage the fallout from Brexit," McGrath said. (Editing by Andrew Roche)