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News : Irish Economy Last Updated: Oct 27, 2010 - 10:12:08 AM


Ireland Four Year Plan for Budgets: Government announces planned fiscal adjustments of €15bn over four years to meet target deficit of 3% of GDP by 2014
By Finfacts Team
Oct 26, 2010 - 5:45:26 PM

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From left to right: Jean-Claude Trichet, President of the European Central Bank, and Brian Lenihan, Irish Minister for Finance, in June 2010.

Ireland Four Year Plan for Budgets: The Government has today announced that an overall fiscal adjustment of €15bn over the next four years is warranted in order to achieve the target deficit of 3% of GDP by 2014. The key reasons for the significant increase from the figure announced in Budget 2010 are lower growth prospects both at home and abroad and higher debt interest costs.

The Department of Finance says the purpose of the Four Year Plan for Budgets and Economic Growth is to chart a credible way forward for this country. The size of the adjustment for 2011 and the distribution over the remaining years will be announced in the Four Year Plan. The plan will contain targets for growth and strategies for the achievement of those targets.

The Government said it realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures. To do so would further undermine confidence in our ability to meet our obligations and responsibilities and delay a return to sustainable growth and full employment in our economy.

"Our obligations are clear. We must demonstrate that we are bringing sustainability to our public finances. We must stabilise our debt to GDP ratio over the period of the Plan. And we must set out our strategy for returning our economy to growth," a Government statement concluded.

Following briefing at the Department of Finance this evening, Fine Gael's Finance Spokesman Michael Noonan said he understood the breakdown over each of the four Budgets will be announced during the third week of November.

The Government's statement came after the Cabinet held a day-long session to discuss the Budget and the four-year economic plan.

Ministers met for over three hours at Farmleigh House in the Phoenix Park last night.

The meetings were ahead of this week's Dáil debate on the economy.

The Government has warned that in addition to increased taxes, there will be spending cuts in health, social welfare and education.

 

Minister for Finance Brian Lenihan confirmed last night that the first installment of the four-year plan would have to be the biggest.

“The Government accepts that there must be significant frontloading in relation to this figure in the budget this year . . . that first instalment will have to frontload a sizeable part of that adjustment,” he told reporters.

The Government's is targeting an average growth rate of 2.75% for the next four years. If growth is lower, the fiscal adjustment will be even bigger than €15bn. However, a stronger international recovery would ease the pressure.

Reducing jobs numbers and increasing local demand is key to the domestic recovery.

IBEC chief economist Fergal O'Brien said:"It is essential that we don't stunt our fledgling economic recovery by overtaxing the country. The bulk of the adjustment must come in the form of current expenditure reductions.

"The Irish economy remains in the international spotlight and it is vital that we take the steps necessary to restore confidence. We must demonstrate our ability to solve our own problems and unfortunately this means tough decisions."


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