Ireland Told by EU It May Need More Budget Cuts to Meet Targets
Ireland’s government may need more fiscal tightening in 2012 to meet budget targets, the European Commission said in documents supplied to German lawmakers.
Finance Minister Michael Noonan laid out 3.8 billion euros ($5.1 billion) worth of tax increases and spending cuts in December as the Dublin-based government sought to narrow the shortfall to 8.6 percent of gross domestic product in 2012.
“The growth outlook could continue to deteriorate significantly,” the commission said in the documents obtained by Bloomberg News, which were supplied to lawmakers by Germany’s finance ministry. “A further deterioration of the macroeconomic backdrop could require additional fiscal tightening later in the year.”
The commission urged Ireland to reassess its deficit forecasts later this year and detail how it will reach the European Union’s 3 percent limit by 2015. It is part of the so- called troika, which includes the European Central Bank and the International Monetary Fund, in charge of monitoring the Irish economy after the nation sought a 67.5 billion-euro bailout in November 2010.
Paul Bolger, a spokesman for the Irish Finance Ministry, said he wouldn’t comment on “leaked documents.”
“The commission staff report is being considered by senior officials from European Finance Ministries today and is due to be published tomorrow,” he said in an e-mail.
In November, the government drew criticism from opposition lawmakers after a plan to raise the sales-tax rate was provided to German lawmakers before being detailed in the Irish parliament.
The commission said that an initial asset-sales plan provided by the government in December hadn’t been sufficiently ambitious and had been revised. The government said earlier this month it will seek to raise as much as 3 billion euros from selling assets.
The commission produced the report after its latest review of Ireland in January, which found the government meeting bailout targets. Ireland’s October 2020 bonds, regarded as the benchmark, yielded 6.96 percent today, down from 9.1 percent at the start of December. The yield on the equivalent Greek security is 35 percent and on the Portuguese note it’s 13.6 percent.
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