Figures reveal Ireland had highest deficit in EU last year
Markets shrug off data as shortfall more than halved and 2012 target remains on course
GOVERNMENT spending here is still running ahead of tax revenue to a greater extent than anywhere else in the eurozone.
However, the latest statistics show the country is on course to meet this year's deficit targets without further austerity measures or tax hikes.
There was some confusion after the latest data was published yesterday with the Department of Finance and the European statistics agency Eurostat presenting two different figures for Ireland's 2011 deficit in government spending.
Eurostat said the Irish deficit reached 13.1pc of gross domestic product (GDP) last year, down from 31.2pc in 2010.
Using the same data, the Department of Finance was quick to point out that the underlying shortfall in spending versus taxes was 9.4pc of GDP.
That figure is more than 1pc below the target set by the EU/IMF bailout lenders to bring the deficit down to 10.6pc in 2011. It means the country is well on course to meet this year's deficit target of 8.6pc
Eurostat arrives at its more startling deficit figure because it is treating €5.8bn pumped by the state into the banks last year as a "deficit-increasing capital transfer."
The taxpayer pumped a total of €16.5bn into the banks which means that around a third of the cash is being treated as government spending rather than investment.
Bond markets shrugged off any hint of confusion over the latest numbers yesterday.
"Nobody likes a headline deficit of 13.1pc, but the Eurostat numbers are explicable and there was no adverse reaction in the markets," said Donal O'Mahony of Davy Stockbrokers. He said the underlying deficit figure was the one investors would look at, and it was on target.
The Irish deficit remains high. Even looking at that lower underlying figure it is worse than the 9.1pc deficit in Greece, Spain's 8.5pc shortfall and the UK's 8.2pc.
Finland and Luxembourg are the only countries with close to balanced budgets, with deficits of less than 1pc each.
Yesterday's data is not the first time that the Government and Eurostat have clashed over the true scale of the Irish deficit.
In the past Eurostat has insisted that the full €30bn cost of the controversial Anglo Irish Bank promissory notes would all have to be included in the figures for 2010 -- even though the cash is to be paid out over a decade.
It was the main reason for Ireland's record-smashing 31.2pc deficit.
That one-off hit in 2010 explains why the deficit has more than halved since, even going by the worst of yesterday's statistics.
Eurostat attached two reservations to the Irish data. It is still waiting for final restructuring plans for nationalised lenders AIB and Irish Life & Permanent (IL&P) before it can confirm the size of capital injections.
Secondly, it raised a concern that NAMA's debts could have to be added to the overall government figures if IL&P's stake in the debt agency is not sold, following its nationalisation.