Bigger budget cuts needed if growth stays slow, EU warns

Bigger budget cuts may be needed this year if growth continues to slow and the tax take drops further, the European Commission will warn today.

The commission will say it is essential Ireland cuts its deficit to 8.6% of GDP as agreed — but this will put the EU’s executive arm on a collision course with the IMF, the other half of the country’s lenders.

“At the moment we do not think there is a need for additional measures in 2012, but there is some debate on what is the best way forward if there is a negative shock,” according to an EU source.