Budget adjustment for 2011 to total €6bn

Sunday 07 November 2010 07.06
Brian Lenihan - Consolidation package of €15bn will be required over next four years
Brian Lenihan - Consolidation package of €15bn will be required over next four years

The Government has said it plans to take measures totalling €6bn in December's Budget as the first step in its efforts to bring the deficit in line with EU targets by 2014.

This is double the amount Finance Minister Brian Lenihan signalled in last year's Budget.

The Department of Finance this afternoon published an Information Note on the Economic and Budgetary Outlook 2011-2014.

Speaking on RTÉ’s Six One, Taoiseach Brian Cowen said the Government's budgetary strategy is on course and the cuts could be managed if people recognise we are half way through the adjustment and will be two thirds through by the end of next year.

He said unless we make these changes we would put at risk all the gains we have made.

Mr Lenihan anticipates that this package of measures will reduce the debt to GDP ratio to between 9.25% and 9.5% next year.

The Government has decided that a consolidation package of €15bn will be required over the next four years, if it is to achieve its 3% deficit target by 2014.

Minister Lenihan said in a statement: 'I want to stress again the strength of the Government's resolve to return the country to a sustainable fiscal position.

‘I am well aware that such measures will impact on the living standards of everybody. But our spending and revenues must be more closely aligned. This is the only way to ensure the future economic wellbeing of our society.’

'By the end of 2011 we will have implemented over two-thirds of the overall adjustment and we will be on the path toward renewed budgetary sustainability,' he added.

In announcing the adjustment of €6bn, the Department of Finance did not include details of expenditure and revenue measures.

However, the statement does say 'it is assumed... the majority of the adjustment takes place on the expenditure cuts.'

Fine Gael's Michael Noonan has said he came out of a briefing on the proposed adjustment figures with ‘very little confidence’ that the Government understands what the country needs.

He said the people wanted some confidence and hope from the Government.

Earlier, Sinn Féin's Arthur Morgan also criticised the Government strategy, saying if cuts could fix the economy it would already be fixed.

European Commission welcomes news

The European Commission has said the Government's target of a €6bn cut in the 2011 budget was ‘appropriate’ and it welcomed the Government's decision to ‘keep the finances on a sustainable path.’

In a statement, the EU Commissioner for Economic and Monetary Affairs Olli Rehn said he welcomed the Government's ‘continued commitment to reducing the deficit to below 3% by 2014.’

He said it provided an important anchor for financial markets and also underlined the Irish authorities' commitment to putting the public debt on a sustainable downward path in the near future.

The Commissioner, who is due to be in Dublin on Monday and Tuesday, said ‘difficult but necessary policy choices are still to be made as regards the measures needed to reach this objective.’

In this context, a 2011 budget involving a consolidation effort of €6bn, as indicated in the note, would be appropriate, as it would strike a balance between allowing the recovery to strengthen and addressing budgetary challenges in a timely and frontloaded fashion.’

The statement added that during his stay in Dublin, Mr Rehn will also discuss the economic situation and the challenges to the Irish economy and citizens with representatives of Irish political parties, the social partners and the Central Bank.