Government rejects debt warning

The Government has rejected warnings by a team of special fiscal advisers that it is in danger of missing its debt targets.

Officials said the Exchequer return figures for the 12 months to the end of March show Ireland is on course to reduce its deficit to 8.6% of GDP this year.

However, only hours earlier, the Irish Fiscal Advisory Council (IFAC) had warned that the Government may need to save another €400m if it is to reach the EU/IMF goal.

Department of Finance assistant secretary Michael McGrath said the council team were working off older data than its own figures.

“To be fair to the council, its report would have been based on data available up to February,” said Mr McGrath.

“The numbers that we are presenting today don’t suggest that the targets won’t be met.

“It’s still very early days so we will continue to assess and monitor, but on the basis of what we say today.”

Mr McGrath pointed out that tax revenues are up 10% from last year, while the Exchequer deficit was €2.8bn lower than in March 2011.

That positive outlook came after the IFAC warned that Government growth predictions for the economy are too high and that Ireland may need to make additional adjustments through more taxes or bigger cuts.

Mr McGrath said while he would not rule out revising this year’s growth projections down, he would not do so today.

“I’m not going to be bounced into giving a back of the envelope calculation,” he said.

While the IFAC suggested the Government make adjustments, chairman John McHale said a mini budget any time soon would be unlikely because the Government has built-in buffers.

“I think it is essential that the 8.6% target is not missed,” said Mr McHale.

“For the sake of missing it by a small amount, the cost of that in terms of our credibility would be quite high.”

Mr McHale explained that the outlook for 2012 has weakened since the Budget was published in December.

He said the fact that prospects for Irish exports and domestic demand are muted, coupled with the fact that there is less certainty within the global economy has caused growth projections to be revised down.

As such, the chances of the Government reaching its deficit target have been weighed down too.

“This may point to the need for additional fiscal restraint during 2012, although it is too early in the year to provide a firm assessment,” he said.

Mr McHale would not suggest how the Government could rein in its spending to make savings.

“I don’t think at this point a mini-budget is likely,” he said.

“What would have to be included in it if that had to take place is not a discussion for the fiscal council. That’s a political matter.

The Government is committed to making budget adjustments of €12.4bn from now to 2015.

However, the council has suggested it saves an extra €2.8bn in taxes and spending cuts to ensure it reaches its long-term targets.

If the Government takes the advisory council’s advice on board, it could have a budget deficit of 1.7% by 2015 compared with its current target of just under 3%.