Watchdog backs €2bn Budget cuts
Published 17/06/2014 | 02:30
FAILING to impose the full €2bn in cuts pencilled in for the Budget would put meeting a crucial EU deficit target in jeopardy, the State's budgetary watchdog has warned.
And if it's not met, this could leave Ireland being hit with a fine of about €300m from Europe as well as a rise in borrowing costs, the Fiscal Advisory Council (FAC) said yesterday.
FAC chairman Professor John McHale insisted Finance Minister Michael Noonan should stick with the plan to impose further austerity despite hopes that stronger-than-expected tax revenues may lead to a softer Budget.
"We're certainly aware of the political difficulties in terms of implementing another very difficult budget," Prof McHale said at the launch yesterday of the FAC's latest report card.
But the FAC said the worst should be over after next year with about €32bn taken out of the economy since 2008.
Under European debt and deficit rules, the Government must cut the gap between how much it spends and takes in through taxes and other revenue to below 3pc of the value of the economy during 2015.
The forecast for this year is 4.8pc, with the Government predicting that it will fall to 2.9pc next year.
Prof McHale said the Government doesn't have much wriggle room.
"The news so far is reasonably encouraging, but if anybody based on that is highly confident that the 3pc target will be met, they're not really factoring the level of uncertainty that surrounds growth," Prof McHale said.