Cowen says exchequer deficit to reach €8 billion

Taoiseach Brian Cowen today said Ireland’s exchequer deficit would be €8 billion this year and warned that it could rise to €20 billion in 2010 unless corrective action was taken.

Speaking ahead of the release of end-of-year figures for Government revenue tomorrow, Mr Cowen said there was a "significant deterioration" in tax receipts over the past three months.

The shortfall for the year is "in the order of €8 billion", the Taoiseach told RTE Radio's This Weekprogramme.

Mr Cowen said the Government would have to take "decisive action" in conjunction with the social partners to bring spending back in line with tax revenues over the next four to five years.

He said allowing such a level of indebtedness and borrowing to grow was neither "sensible" nor "sustainable".

Mr Cowen accepted that the budget deficit could rise to as much as €20 billion in 2010. "We have to address this issue that has now emerged and do that over a credible time frame."

The Taoiseach said the new national pay deal may need to be revisited. All options would be on the table during talks with the social partners later this month.

However, despite the economic crisis, tax increases were not an "immediate priority".

"But there's no doubt in my mind that over the next four to five years if we're to get a credible pathway back to balance in the current budget position … then taxation will have to pay some role in that as well."

He also warned the unemployment would rise next year. "We have to be frank and say to people that clearly the demand for Irish goods and services is well done now … compared to previous times when the global economy was more buoyant. We, as an open economy, feel the brunt of that."

"We've come through recessions before and we do have to look to our own capacity as a people to pull together," he said.

He cautioned the public to lower their expectations for the forthcoming few years, saying there is going to be a lower standard of living, comparable to those of 2004 and 2005. "Is is about taking some steps back now so that we can provide a future for ourselves and our kids in the years beyond that," Mr Cowen said.