Politics determined the €2.5bn budget figure

Next Tuesday Michael Noonan will stand up to deliver the latest in a long line of austerity budgets that stretches back to 2008. There has been considerable speculation and argument in recent months about the desirable size of the budget adjustment.

The Government originally committed to an adjustment of €3.1bn, but the Minister for Finance made it clear this week the adjustment would be €2.5bn. This figure is based on the fact that even with the lower adjustment, the deficit in 2014 is still forecast to come in at 4.8% of GDP, lower than the target of 5.1% in the troika agreement.

The logic behind this thinking is fair enough on the surface. If the deficit is still projected to come in below the 5.1% target, then running with the lower adjustment is justified.