Borrowings 3% more than GDP

THE government’s borrowings this year will be more than 3% of GDP and will breach the EU’s guidelines, Finance Minister Brian Lenihan has warned.

The speed of the slowdown has taken both the Government and the European Commission by surprise, he said, with economic growth plummeting to close to zero from more than 4% last year and with a €5 billion shortfall.

Mr Lenihan said the Government will continue to roll-out the €184bn National Development Plan, but warned that it will not be as quickly as originally proposed.

“We want to be within the 3% like the rest of the countries. That is not where we will be,” he said after the meeting of finance ministers in Nice.

Under the Stability and Growth pact designed to keep the euro stable, countries are expected to live within or as close as possible to their budgets. Once they go over 3% it triggers legal action by the European Commission.

However Mr Lenihan was anxious to emphasise this would not result in a showdown with the commission. “There is no question of a show down. We have good relations with the commission that is anxious to help.

“We will work on Ireland’s problems together as they are not just Ireland’s problem, but Europe’s also,” he said.

The Government will officially notify the commission at the end of September about the expected deficit breach.