Ireland warned to cut €2.5bn next year

The Government should make a €2.5 billion adjustment in next year’s budget instead of the planned €2 billion in cuts and taxes, the European Commission has said.

In a paper sent to the Oireachtas Finance Committee, the commission argues that a greater adjustment is required to bring the deficit down to 3 per cent of GDP by 2015.

While it says the Government is still committed to this, it notes the target is not underpinned by “broad policy measures and relies on a fiscal adjustment of around €2 billion”.

“Based on the troika’s forecast, a larger fiscal adjustment of around €2.5 billion is required to reach the deficit.”

The warning comes as Ireland prepares to exit the bailout later this week, and the report also says there are “some concerns over the quality of some savings, particularly in the health sector”.

'Soft saving measures'
"The health sector in particular, relies on soft saving measures and some specific actions still to be defined in the health service plan."

It adds: “Delays in the 2013 health sector measures endanger the 2014 health budget”, with a third of health savings planned for this year yet to be achieved.

It also says the “outlook remains challenging” for some banks and financial institutions, and adds “there are still concerns that courts do not have the resources to process the upcoming wave of legal cases” on home repossessions.

It also criticised delays in enacting the Legal Services Bill, while saying progress is being made in job activation areas like the Solas scheme operated by the Department of Social Protection.

However, it also says Ireland has performed well in the bailout.