Anglo Irish and Nationwide rescue to see deficit hit 17%

THE Government’s decision to pump extra capital into the failing institutions Anglo Irish Bank and Irish Nationwide Building Society (INBS) is likely to bump the 2010 budget deficit up to 17% of GDP – nearly 6% higher than initial targets.

The Central Bank’s latest quarterly bulletin published yesterday forecast that the budget deficit is set to come in at 11.8% of GDP this year, in line with Budget 2010’s 11.6% target.

However, when the payment of promissory notes to Anglo is taken into consideration, the projected budget deficit for this year, would rise to 17%. Promissory notes allow for payments on investment to be spread out over several years. Some €10.9bn of these notes are being invested in the two institutions.