A TOUGHER budget than expected in December has been signalled by Minister for Finance Brian Lenihan in an effort to reassure international money markets that the massive exchequer deficit will be reined in by 2014.
Mr Lenihan said in Galway yesterday that the Government may seek even deeper cuts in the budget than the €3 billion in adjustments already promised.
Speaking as he arrived for the start of the two-day Fianna Fáil parliamentary party meeting in Galway, the Minister said the figure of €3 billion was only indicative and was a minimum that would have to be achieved to help address the State’s struggling finances.
“The figure of €3 billion is a minimum, but clearly Government will have to go through the different departments,” Mr Lenihan told reporters.
“We have to look at what can be saved and what the correct position is.”
Last July, the International Monetary Fund (IMF) warned that the fiscal adjustment in December’s budget might have to be larger than the €3 billion envisaged by the Government.
The IMF queried the lack of detail in some of the Government’s plans, saying that while figures had been provided for future annual spending cuts, there was no clear indication where those cuts were going to be achieved.
In recent weeks, the cost of the Anglo Irish Bank bailout has led to renewed doubts about Ireland’s ability to achieve its target of cutting the budget deficit to 3 per cent of gross domestic product (GDP) by 2014.
Mr Lenihan’s comments yesterday came after a spate of negative commentary in the international media about the country’s financial standing.
He said there was scope for the Government to increase the €3 billion target for next year if it was so minded but he said no decisions had been taken at this stage.
Mr Lenihan said that the Government had to strike a balance in making cuts in a way that did not damage the economy.
“Last year, we were told by many in the Opposition parties that in seeking the €4 billion we would in some way damage the economy. But in fact, as we have seen, there has been economic growth this year so that’s the balance the Government has to draw.”
Two senior Ministers backed Mr Lenihan’s stance on the budget cuts.
Minister for Enterprise, Trade and Innovation Batt O’Keeffe said Mr Lenihan and Taoiseach Brian Cowen had always said the minimum requirement in December’s budget would be €3 billion.
Minister for Justice Dermot Ahern also said the Government was on line with the task agreed with the European Commission, and it was “always a minimum of €3 billion this year”.
Fine Gael finance spokesman Michael Noonan said later that taxpayers could expect even higher taxes and deeper cuts in the next budget as the cost of bailing out Anglo Irish Bank spiralled ever higher.
“As the markets get jittery over the Anglo black hole, the Irish people face even larger tax increases and service cuts in December than they had been led to expect,” he said.
Mr Noonan said that Mr Lenihan’s comments yesterday were motivated by a desire to stiffen the resolve of Fianna Fáil backbenchers for deeper-than-expected cuts.
Fine Gael leader Enda Kenny yesterday described Brian Cowen as the worst minister for finance in the history of the State.
