Budget deficit may hit record 23% high

THE Government budget deficit could reach a record-breaking high of 23% this year as a result of public money being pumped into Anglo Irish Bank and Irish Nationwide.

This additional €20.6 billion would double the forecast deficit, making it almost as high as the US government’s wartime deficit of 26.5% of GDP in 1942.

Labour Finance spokeswoman Joan Burton said she believed there was a 50/50 chance of the money being added to the deficit.

“This affects the bond market and will make borrowing for the Irish Government more expensive as the debt burden is not credible,” she warned.

Eurostat, the EU’s data agency, will decide whether the once-off sums should be added to the Government’s bottom line, but it refused to comment. It insisted the €4bn put into Anglo Irish last year be included in the deficit for 2009, increasing it by 2% of GDP to 14.3%, by far the highest in the EU.

This year the Government has put another €2.6bn into Irish Nationwide and €10.3bn into Anglo Irish with another €7.7bn due for the nationalised bank, possibly this year as well.

The Department ofFinance has suggested Eurostat will not add it to the deficit this year because it is in the form of a promissory note, while last year’s money to Anglo Irish was paid in cash. The department is arguing for the money to be spread out over 10 years, reflecting the terms of the promissory notes. A spokesperson said they did not yet know how Eurostat would treat the money.

Ms Bruton said: “If they do add it all in, it will drive our deficit figures through the roof but the jury is out yet on what they will decide to do because of the promissory notes.

“Because the money is lost and there is no return on the injection of funds into Irish Nationwide and Anglo Irish Bank, you have to assume that there is at least a good chance that they will add it to the deficit.”

Eurostat may, however, delay publicly adding it to the deficit figures until next spring’s economic forecast – as they did with the money paid over in 2009.


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