Government needs to take €4bn out of economy in budget
THE GOVERNMENT will have to make a budget adjustment of €4bn if the EU/IMF/ECB target of 8.6pc of Gross Domestic Product (GDP) target is to be met.
In its first report, the Fiscal Advisory Council, a new body made up of five economists and established by the Government to advise it on budgets and planning, said €400m of cuts or tax hikes are necessary to stay on track next year.
But it believes the rest of the Government programme should bring down the deficit to 3pc of GDP by 2015.
Weaker-than-expected economic growth, meanwhile, has knocked the Government’s plans slightly off course, hence the necessity for the €400m extra.
But it argued that the Government should go even further with austerity measures that would lead to a budget deficit of 1pc of GDP by 2015.
It added that politicians should not be ruling out changes to tax rates, social welfare rates or public service pay rates as this is limiting their options.