EU will warn Government to stick to plans for budget

The EU Commission will warn the Government today to stick to its plans for October’s budget, despite the most likely next leader of the Labour Party, Joan Burton, saying she does not think the €2bn in spending cuts and tax increases is going to be necessary.

In its recommendations for the economy, the EU Commission is expected to say there should be no leeway in meeting the target of reducing borrowing to below 3% of GDP next year.

Ahead of discussions throughout the coming months on what level of adjustment will be needed, the Commission is to recommend that budget plans should be adhered to in order to retain the confidence of international markets.

It is expected to tell the Government to control the health budget following over-spending this year and to deliver on promised reforms of the legal system.

Ms Burton said she would prefer to concentrate on growing the economy and reducing spending by getting people back to work.

Asked if she is supportive of a €2bn adjustment, she said: “I don’t think it’s going to be necessary” referring to projections by the think-tank, the ESRI, that such an adjustment might not be needed if growth continues.

She spoke after John McHale, chairman of budgetary watchdog the Fiscal Advisory Council, said the planned €2bn adjustment “should be pursued”.

At a conference on austerity hosted by the University of Limerick, Prof McHale accepted the adjustment could cause political difficulties, but said: “We are on the verge of getting out of the EU’s excessive deficit procedure to get below a 3% deficit in 2015, and the current projection is that €2bn would do that.”

Ms Burton will set out her pitch to the Labour membership this week, with plans focusing on improving living standards, lifting the tax burden on low and middle income families and pushing for further relief on the legacy bank debt.

She faces opposition from junior health minister, Alex White, and possibly from the Kerry North TD Arthur Spring, who will announce today whether or not he will contest the leadership.