Cowen hints at possible increased borrowing

 

Taoiseach Brian Cowen has hinted the Government may have to go beyond its target of limiting borrowing to 9.5 per cent of GDP this year due to worsening financial circumstances.

Mr Cowen told the Dáil this morning the Government would seek to be “as close as possible” to the target. He said the priority was to get back to the stability and growth pact guidelines of a 3 per cent deficit by 2013.

"Of course we will seek to be as close as possible to 9.5 per cent in the context of what's best for the economy," he said. "What is imperative is that we do this in a way that takes account of the capacity of the economy to bear the burden of the adjustment required."

Mr Cowen said the 9.5 per cent target was set in January based on available Exchequer returns. Since then, there has been a deterioration of the public finances, making the task of cutting the borrowing deficit to 3 per cent “very great indeed”.

He said “fixating on a particular percentage” would not help. What was more important was the measures the Government would take to eliminate the deficit by 2013, he said.

Both Fine Gael leader Enda Kenny and Labour’s Eamon Gilmore demanded that Mr Cowen reveal the projections for this month’s tax take and what effect that would have on the budget.

Mr Kenny asked Mr Cowen what has changed since January to make the Government “move away” from the 9.5 per cent target. “Are we to head into this budget as ill-prepared as we were in October?” he asked. “What is to happen if the tax figures are even worse?”

Mr Gilmore said it was vital that the Dáil be given “some clear idea of what the target is” and claimed the Government had been “caught by surprise” by last month’s Exchequer returns.

“Presumably you and your minister for finance have been monitoring what has been taking place in March,” he said. “So can you tell us if the position is going to be worse by the time we get to budget day?”

Mr Cowen said the Cabinet was currently engaged in discussions and consultations on the make up of the budget.

“We are committed to bringing forward a multi-annual report that will reduce our deficit back to 3 per cent by 2013. In the meantime, we are in discussion about working out what is the best way that adjustment can be made taking account all of the requirements of the situation,” the Taoiseach said.

“So I’m not in a position … to come into the House on a daily or weekly basis to give progress reports on budgetary discussions which are continuing but which have the overall objective which I’ve outlined.”

Even at the targeted 9.5 per cent of GDP this year, Ireland's budget deficit is the worst in the euro zone.

The European Union yesterday set a 2013 deadline for Ireland to bring its deficit back in line with the EU limit of 3 per cent of GDP. The Government will need to make savings of about €20 billion over the next four years to reach that target.

Irish Congress of Trade Unions general secretary David Begg warned this afternoon that sticking to the 9.5 per cent target could lead to a “very, very great” shock to the economy. "It is very important for us that the parameters of the budget are set at a realistic level and that they don't have the effect of damaging the economy by casting it into a sort of deflationary spiral."

Fine Gael finance spokesman Richard Bruton claimed the Government was “floundering” over the budget. “Is the Taoiseach just backing down from a target which he rashly impaled himself upon and which he simply can’t now stand over?" he asked.

Speaking in the Dáil today, Liz McManus of Labour said the budget must be fair.

"We know that this budget will be tough. But we have no guarantee that it will be fair. In fact the record so far of this Government has been to attack the vulnerable and protect the powerful. It is a Government bloated with too many junior ministers and private consultants and too little product to show for it.

"It flounders from action to reaction when its decisions prove inadequate to the task of leading us out of the quagmire we are in. While thousands of people join the dole queues thousands more worry that their jobs are in jeopardy," Ms McManus said.