The Minister for Finance Brian Cowen has reacted strongly to the suggestion from the IMF that he will be introducing cutbacks of €800 million in his budget in December.
The Minister said ' we are not in cut back country ' and that he wanted to correct any impression that the Department of Finance was talking about cutbacks.
He said that Ireland is in a strong economic position internationally and that the Government strategy is a continuation of the kind of policies they've used in recent years.
He said the main spending priorities will be health, education and social welfare.
In a report yesterday the International Monetary Fund warned that Irish households are not saving enough for retirement and that better regulation is needed to stimulate competition in the banking, retail, insurance professional services and retail.
According to the IMF the top three risks are a slowdown in global growth, a further deterioration in competitiveness, and a sharp fall in house prices.
The report says economic policies can help to reduce those risks by encouraging saving on both government and households levels, by wage moderation, and by working towards stability in the financial system.
The IMF said that Budget 2005 released too much money into the economy, and it recommends fiscal tightening in Budget 2006. It says Brian Cowen should use the next budget to take as much as 0.5% of GDP or €800 out of the Irish economy to dampen demand.
The IMF , which met Finance Minister Brain Cowen, and representatives from the Central Bank, IFSRA, and employers' and unions in Dublin last May said Irish economic performance has been impressive and growth is likely to be very strong in the short term.
It says labour market flexibility is good but that with high labour costs wage moderation is needed in both the national wage agreement and the the next public sector benchmarking exercise.
