Irish deficit may remain highest among euro states -- EU
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Ireland’s budget deficit may remain the highest among the 16 euro member states this year and next, the European Commission forecasts.
Ireland’s budget shortfall may average 11.7pc of gross domestic product in 2010 and 12.1pc of GDP in 2011, the European Commission said today.
In 2009, the country had a deficit of 14.3pc of GDP, more than four times the European Union’s 3pc limit.
The Government may struggle to push down the budget gap as it injects billions of euros into lenders such as Allied Irish Banks and the nationalised Anglo Irish Bank.
“An effect of such capital injections on public finance developments within the forecast horizon cannot be excluded,” the commission said.
Today’s forecasts don’t include the potential impact from additional money the state may have to invest due to the “absence of detailed information on the nature and size of these operations,” it said.
Among the 27 EU nations, only the UK will record a higher deficit than Ireland this year, at 12pc of GDP.
The Irish economy will probably shrink 0.9pc this year before expanding 3pc in 2011, the commission said. That would be the first full-year expansion in four years.
Unemployment may average 13.8pc in 2010 and 13.4pc in 2011, while state debt is seen rising to 77.3pc of GDP this year from 64pc of GDP in 2009.
In the euro region, the deficit may widen to 6.6pc of GDP in 2010 from 6.3pc in 2009, the commission said. Government debt may average 84.7pc of GDP this year.
- Simone Meier
© Bloomberg
