Gilmore disagrees with IMF over Budget adjustment

Thursday 19 June 2014 08.21
IMF Mission Chief to Ireland Craig Beaumont said the fund 'favours sticking to the planned adjustment'
IMF Mission Chief to Ireland Craig Beaumont said the fund 'favours sticking to the planned adjustment'

Tánaiste and Minister for Foreign Affairs and Trade Eamon Gilmore has said that he does not believe it is necessary to cut €2bn from this year's Budget.

He was speaking in Washington DC, in response to the latest commentary today from the International Monetary Fund, which urged the Government not to ease up on its tough budget plans.

Mr Gilmore said the economy was performing well and he did not think cuts of €2bn would be required to reach the target to reduce the deficit to under 3% of GDP by next year.

He said the same argument about "staying the course" had been made ahead of last year's Budget and it turned out that the €3.1bn adjustment was not required in the end.

He said there were good exchequer returns recently, the economy was starting to grow and the numbers of people returning to work had reduced what was paid out in social welfare and increased the tax take.

The IMF's advice echoes that of the Fiscal Advisory Council earlier this week. 

In its first monitoring review of Ireland following the exit from its bailout programme earlier this year, the IMF noted that Ireland’s economic recovery was "broadening" with unemployment falling and signs of a pick-up in domestic demand in the form of "firming retail sales growth".

However, it said, there is "substantial uncertainty" about the level of growth in economic output.

Under European Union rules the Government is required to reduce the budget deficit to an amount equivalent to 4.8% of annual economic output or GDP by the end of this year.

In April the Department of Finance estimated a budget adjustment of €2bn would be required to achieve that target. But the Minister for Finance has since indicated it might be possible to hit the deficit target with less severe adjustment than that.

On a conference call following the publication of its review, IMF Mission Chief to Ireland Craig Beaumont said the fund "favours sticking to the planned adjustment". 

He said the €2bn figure was appropriate as it should achieve the required budget deficit even if Ireland's economic growth this year was weaker than expected.

Mr Beaumont said the fund also continued to support the country's case for some form of retrospective recapitalisation of Irish banks.