SHELLSHOCKED OPPOSITION POLITICIANS have been told by the Department of Finance that the crisis in the public finances is worse than feared, with the hole in the government’s finances now shaping up to be as much as €15bn – double the previous “worst case scenario” estimate.
The economy is failing to recover in line with expectations meaning that savage cutbacks and tax hikes of at least €10bn will be a reality until 2014, the Irish Times reports.
The pain will not be spread evenly across the next four years; this December is likely to carry the deepest cuts for families across Ireland, with the cutback target reaching anywhere from €4.5bn to €6bn.
If the hole in the budget hits the €15bn mark, the government would have to make an adjustment of up to €7bn to get the deficit below 10 per cent.
The Department of Finance outlined the following reasons for the new projections: growth may be half of what was originally projected, the cost of servicing the national debt is rising, and a shortfall in projected income from taxes is now expected as fewer people are employed - and many of those who are have suffered wage cuts.
Last year, Finance Minister Brian Lenihan said there would be €3bn in cutbacks in 2010; €2bn in 2012; €1.5bn in 2013; €1bn in 2014 - totaling cutbacks of €7.5bn.
However, the latest information from the Department of Finance would indicate that more ferocious cutbacks are on the cards. The revised targets of between €10bn and €15bn mean the government is now facing the prospect of cutting more than €1bn annually than originally planned.
The Irish Independent reports that pressure coming from the European Commission and the international markets have forced the government to revise its predictions. A source told the newspaper:
The markets are sceptical of forecasts with high numbers for 2012-2014 coming from any country.
Labour’s finance spokeswoman Joan Burton said the figures provided by the Department of Finance were “very challenging“. She added:
Our discussions today were mainly about the macro issues of growth and also about the macro and longer-term issues of the structure of the bank bailout cost, which are to be honest pretty horrific.
When asked by reporters is she was concerned about the information she had received at the briefing she replied: “Very concerned”.
Michael Noonan, Fine Gael’s finance spokesman, said the briefings confirmed the four-year Budget target would be much bigger than previously anticipated:
The figure of adjustment published already in the Government plans was €7.5 billion. With lower growth rates projected, the level of adjustment is going to be significantly higher than that.
The details of the four year “super budget” will be announced in November.
To embed this post, copy the code below on your site
have your say