Lower growth for next year will mean the government has to
squeeze yet more out of hard-pressed taxpayers. Finance Minister Brian Lenihan
also said Dublin planned to return to international bond markets for financing
in January.
Irish leaders have warned the country needs to significantly
increase planned budget savings for the years 2011-2014 from earlier plans, as
it battles to avoid the sort of debt meltdown that drove Greece to seek foreign
aid.
“Achieving targets set for the deficit expressed as a
percentage of GDP will require more savings because GDP will now be lower than
previously forecast,” Lenihan told a banking conference.
He declined to give his new forecast for gross domestic
product (GDP) growth next year.
He forecast growth of 3.3 percent for 2011 when he unveiled the 2010
budget but economists polled by Reuters expect 2.8 percent and the central bank
has said its forecast of just 2.4 percent is in danger of being trimmed.
A finance ministry spokesman said the government now
expected growth marginally above 0 percent for this year, down from earlier
expectations of 1 percent.
Prime Minister Brian Cowen will meet leaders of the two main opposition
parties later on Wednesday to try to forge a political consensus on how to get
the country’s budget deficit, currently the worst in the EU, back to an EU
limit of 3 percent of GDP by the end of 2014.
A deal would reassure investors that Ireland will remain on
an austerity drive even if there is a change of government, as expected, next
year.
“We are asking the opposition parties to participate in this
process because part of the (issue of investor confidence)... is the
uncertainty about what would happen would the other parties take over,” Lenihan
told reporters at the banking conference.
The premium investors demand to hold Irish debt over
benchmark German paper rose back to 400 basis points on Wednesday but Lenihan
said he planned to go back to markets for more funding in January.
Ireland is betting it can borrow more cheaply next year —
but the threat of political upheaval in the first half and poor prospects for
cross-party backing for its austerity plans mean the window for tapping
investors is small and closing.
An agreement to support cuts would boost the beleaguered
government but restrict the policy options available to a new administration
and junior coalition partners the Greens played down the chances of a deal on
Wednesday.
Green Party leader John Gormley, who first touted the idea
of talks with the main opposition parties, said he was under “no illusions”
over the difficulty of achieving a consensus, which he had previously said was
essential.
“It is difficult to reach consensus, particularly when you
are talking to opposition parties who believe that it is their job to hold the
government to account and their job to destabilize government and get into
government,” Gormley told Irish radio station, Newstalk.
Cowen and Lenihan will unveil a four-year plan next month
outlining how they will squeeze the deficit, which is expected to hit an
eye-watering 32 percent of GDP this year due to the one-off inclusion of a slew
of bank bailouts.
Dublin hopes the four-year plan will convince investors
Ireland can tackle its deficit despite anemic growth and a bill for bailing out
its banks that could hit 50 billion euros.
