Ireland tops 2008 EU budget deficit list

IRELAND had a higher budget deficit than anyother European Union nation last year while the International Monetary Fund (IMF) predicts the recession will be particularly severe here.

Figures released by EU statistic agency, Eurostat showed Ireland posted the highest gap between government spending and revenue in 2008.

Twenty-one of the EU’s 27 states saw their public finances worsen last year, with nine posting deficits higher than an EU limit of 3% of gross domestic product (GDP) and another nine breaking a rule restricting overall government debt.

At 7.1% Ireland was well above the total 2008 EU nations deficit of 2.3%. Britain was close behind with a deficit of 5.5%, Romania was at 5.4%, Greece at 5%, Malta at 4.7% and Latvia at 4%.

Eurostat said the British figure could worsen because it was investigating if Britain should be counting as government debt £185 billion (€206bn) of treasury bills issued by the Bank of England to inject liquidity into the banking sector from April last year.

The entire EU economy was worth €12.5 trillion last year, according to the figures, with the eurozone weighing in at €9.27tn.

Meanwhile, the IMF said Ireland, Spain and Britain are experiencing major corrections that most likely have a considerable distance still to run.

“The recession is projected to be particularly severe in Ireland, as its construction boom is painfully reversed,” it said.

The IMF said yesterday that the global recession will be deeper and the recovery slower than previously thought as financial markets take longer to stabilise.

The Washington-based IMF said in a new forecast that the world economy will shrink 1.3% this year, compared with its January projection of 0.5% growth.

Recovery will depend on policy efforts to cleanse banks’ balance sheets and craft measures that spur demand, it said.

“The key factor determining the course of the downturn and recovery will be the rate of progress toward returning the financial sector to health,” the fund said in its semi-annual World Economic Outlook.

“Even once the crisis is over, there will be a difficult transition period, with output growth appreciably below rates seen in the recent past.”

The revised outlook came a day after the fund calculated worldwide losses from distressed loans and securitised assets may reach $4.1tn by the end of 2010 as the recession exacts a higher toll on financial institutions.


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