EU to extend Ireland deficit cut deadline to 2014

By Reuters Staff
November 10, 2009

DUBLIN, Nov 10 (Reuters) – The European Union is set to give Ireland a one-year extension until 2014 to reduce its budget deficit to the EU’s 3 percent of gross domestic product limit, Irish media and a governing party official said on Tuesday.

Draft documents obtained by Reuters showed on Monday the European Commission would propose to give Germany, France and Spain until 2013 to bring their ballooning budget gaps in line with the EU ceiling.

Ireland, which expects to have one of Europe’s biggest deficits this year around 12.5 percent of GDP, has so far aimed to cut that to 3 percent by 2013, though unions are lobbying for a more gradual adjustment until 2017.

“We now know there is a possibility of overcoming our budget deficit by 2014 rather than 2013,” Dan Boyle, chairman of the smaller coalition member Green Party, told a debate in the upper house of parliament, confirming an earlier report in the Irish Times which cited EU sources.

Finance Minister Brian Lenihan has said he must find savings worth 4 billion euros ($5.95 billion) in the Dec. 9 budget for 2010, mostly by cutting spending, just to stabilise the budget deficit at around 12 percent of GDP.

The Irish Times report said Economic and Monetary Affairs Commissioner Joaquin Almunia would extend the 2013 deadline on Wednesday due to weakening tax receipts and higher social welfare spending but insist that 4 billion euros must still be saved this year.

“If there was an extension it would lessen the extent of the adjustment required for future years but it would not impact on the adjustment required for 2010,” a finance ministry spokesman said, without confirming or denying that an extension was expected.

The Commission forecast last week that Ireland’s deficit would reach 12.5 percent of GDP this year and grow to 14.7 percent in 2010 and stay there in 2011.

The Irish Times added that Almunia would praise Lenihan for taking ‘effective action’ to address the crisis in the public finances that has plunged Ireland into one of the deepest recessions in the Eurozone.

Lenihan has said there was little scope to raise tax rates after two emergency budgets focused on taxation in the last year, but Boyle told senators:

“I’m confident that there will be additional taxation measures, there has to be additional taxation measures.”

Boyle didn’t clarify which measures he expected.

(Reporting by Padraic Halpin and Andras Gergely; Editing by Andy Bruce) ((padraic.halpin@reuters.com; Reuters Messaging: padraic.halpin.reuters.com@reuters.net; +353 1 500 1504))

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