THE IRISH FISCAL Advisory Council says the government needs to cut €4 billion from its public spending in the next Budget if the country is to make its 2015 deficit target of below 3 per cent of GDP.
The council, comprised of five economists, was established in July of this year to assess and publicly comment on the government’s progress on its budgetary targets and objectives, and to assess “the appropriateness and soundness” of the government’s fiscal position and projections.
In a report today, the council recommended making a “relatively modest reduction” in the targeted deficit from 8.6 per cent to 8.4 per cent of GDP for 2012, which would require a fiscal adjustment of €4.4 billion.
It said that it was not making the suggestion lightly, “given the painful adjustment measures taken since 2008″ but that it believes “a more rapid restoration of sound public finances, as well as being highly desirable in its own right, will have important favourable effects on the country’s creditworthiness”.
The government had indicated earlier this year that the next budget would see cuts of €3.6 billion on top of the cuts already in place. The ESRI said last month that Ireland could meet its deficit target in three years time due to the interest rate cut on the bailout and suggested Ireland could return to the markets by 2014.
Representatives of the European Commission, ECB and IMF are currently in Ireland to review the state’s deficit reduction progress according to the terms of the bailout, and the troika is expected to focus on Budget 2012.