BRUSSELS (MNI) – Ireland’s government said on Thursday it plans to
make an additional E15 billion worth of savings over the next four years
to bring its budget deficit back below the European Union’s 3%-of-GDP
limit.

The country’s government has already implemented measures worth
close to E15 billion since mid-2008, but lower-than-expected growth and
higher-than-expected costs for the banking sector mean that more
measures are needed to meet the target.

“The Government has agreed on an adjustment of E6 billion for 2011
and this will reduce the General Government deficit to around 9.25% to
9.5% of GDP next year,” Finance minister Brian Lenihan said in a
statement.

Of the total E30 billion in budget savings now planned by the
government, two-thirds will have been implemented by the end of 2011,
Lenihan said.

The costs of bailing out Ireland’s banking system will push the
country’s budget deficit to 32% of its GDP this year. Stripping out the
banks, the deficit is forecast to be 11.9% this year, still the largest
in the Eurozone.

“My department now expects annual average real GDP growth to be
2.75% over the 2011 to 2014 period,” he added.

The blueprint, which will be elaborated later this month, sets out
plans to make E6 billion of savings in 2011, E3 to E4 billion in 2012,
E3 to E3.5 billion in 2013 and E2 to E2.5 in 2014.

That would bring the deficit from around 11.9% this year – not
including the cost of the banking sector – to between 9.25% and 9.5% of
GDP in 2011, 6.75% of GDP in 2012, 5.25% in 2013 and 2.75%-3% in 2014.

The country’s general government debt ratio would rise from 98.5%
of GDP this year to 105% next year and 106% in 2012, before falling back
to 105% in 2013 and 101% of GDP in 2014, under the government’s plan.

“I want to stress again the strength of the Government’s resolve to
return the country to a sustainable fiscal position,” Lenihan said.

“I am well aware that such measures will impact on the living
standards of everybody. But our spending and revenues must be more
closely aligned,” he added.

Earlier Thursday, European Central Bank President Jean-Claude
Trichet, speaking in Frankfurt, called on the Irish government to do
everything that is needed to get its budget deficit below 3% by 2014,
including front-loading its fiscal measures.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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