IRELAND’S CONFIDENTIAL PLANS for the 2013 Budget – which propose to cut spending by a further €2.25bn, and increase taxes and other income by €1.25bn – will not be enough to meet the EU and IMF’s targets for cutting the deficit.
A briefing note prepared for German MPs – who were controversially given details of Ireland’s future financial plans earlier this week – outlines that the Budget plans currently on offer will not meet with the targets set down by the Troika when the bailout programme was first agreed a year ago.
The briefing document – prepared by Germany’s ministry of finance, and obtained by TheJournal.ie – points out that the current Budget plans are likely to leave the government’s deficit at around 7.8 per cent of GDP.
This is despite the agreement of both the previous and current governments to bring the deficit to within 7.5 per cent of GDP.
The outline proposals for the 2013 Budget include further cuts in social welfare spending, a broadening of the income tax base, and even more reductions in the number of people on the public payroll.
Predictions from the European Commission – which are also included in the briefing documents, from which TheJournal.ie published extracts yesterday – show the economy as being likely to grow by 2.3 per cent in 2013.
They also show 2013 as being the year in which a full economic turnaround will kick off, with increasing domestic demand and private consumption, and the first growth in employment since the recession began.
Employment is set to continue to fall in 2012, though, with six out of every 1000 workers predicted to lose their jobs over the course of the year.
The briefing documents circulated for German MPs say it is “too early to give an all-clear” to the Irish economy, telling MPs that Ireland is still reliant on external demand which could be hit by a secondary recession in Europe and beyond.
The MPs are also informed that the Troika’s 2011 targets for the loan-to-deposit radio in Ireland’s banks may not be met, because the domestic banks were continuing to lose deposits as savers moved their cash elsewhere.
“Only a continuation of Ireland’s consistent implementation of the previously successful stabilisation program can continue to win back the confidence of the markets,” the note says.
“In order to avoid new uncertainty on the markets, Ireland must further pursue its adopted austerity and reform measures.”