The officials have acknowledged that “most” independent forecasters have predicted lower rates of economic growth this year than those underpinning the EU-IMF bailout agreement and December budget.
As a result, there are “serious risks” that recovery will not materialise at the pace envisaged just last December when the agreement was approved and the budget announced.
EU and IMF officials arrive in Dublin this week to begin the first quarterly review of progress made in implementing the agreement.
Ireland needs a strong recovery if it is to reduce its debt to sustainable levels. The warning may therefore raise further questions about the Government’s decision to pump another €24 billion into the banks while leaving senior bondholders untouched.
The officials’ assessment is contained in briefing papers prepared for Mr Kenny when he took office.
The papers were sought by the Irish Examiner under the Freedom of Information Act and released on the Department of the Taoiseach’s website over the weekend.
In the papers, civil servants warn that meeting 2011 fiscal targets “will pose major delivery challenges”.
The say the bailout and budget are based on growth projections of 1.7% this year, rising to 3.2% in 2012, with associated reductions in Government debt levels.
But they warn of serious risks to the projections:
* “Most independent forecasts, including the European Commission, have projected lower levels of growth.”
* “Higher than projected costs from financial sector restructuring, including worsening mortgage arrears problems.”
* “Sustainability of public debt levels, of which it has not been possible to convince the markets.”
* “Further economic shocks, including exchange rate movements.”
Publication of the papers came as Tánaiste Eamon Gilmore defended the decision to leave senior bondholders untouched.
Mr Gilmore said it was decided not to burn bondholders in the two “pillar” banks of AIB and Bank of Ireland because they would need to attract investment.
Grilled about his election rhetoric that it would be “Frankfurt’s way or Labour’s way” and that ECB boss Jean Claude Trichet was merely a “civil servant” who would go along with a renegotiated plan, Mr Gilmore told RTÉ that the Government was still negotiating with the ECB.
Mr Gilmore also said Ireland is to launch a major diplomatic initiative to drum up support for a cut in the bailout interest rate.
He aims to meet with the ambassadors of EU countries. Mr Kenny and Finance Minister Michael Noonan are also due to get involved in the diplomatic offensive. But Sinn Féin said it was now clear that Mr Gilmore’s party was “unwinding its election manifesto” in government.
It came as a Cork town staged a protest against the “bondholder bailout”.
Locals in Fermoy plan to continue with marches every Sunday for the foreseeable future, joining the village of Ballyhea in doing so.