Ireland on track to beat deficit deadline

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A RECENT deal to reschedule payment of around 30 billion euros (£25.47bn) of debt should allow Ireland to comfortably beat a 2015 deadline to cut its deficit to below 3 per cent of GDP, its fiscal watchdog said yesterday.

But the government must avoid political pressure to roll back its austerity drive or risk the national debt getting out of control, the Irish Fiscal Advisory Council said in a report.

The council was set up under a 2010 bailout deal with the European Union and International Monetary Fund. Last year, it advised the government to ramp up its austerity drive with an additional 1.9 billion euro fiscal adjustment in 2014 and 2015, on top of 5.1 billion euros of savings already planned.

But a deal in February to switch a costly promissory note used to pay for the rescue of failed Anglo Irish Bank into less expensive sovereign bonds, means that the government will need around 1 billion euros less over the two years.

That deal, combined with a smaller than expected deficit in 2012 and an increase in the forecast for nominal GDP growth, means the government should have enough of a safety net without the extra 1.9 billion euros of adjustments, the report said.

“The suggested margin of safety has therefore been broadly achieved under the government’s current plans and so a case for the 1.9 billion euros in additional adjustments in not being made,” the report said.

“The council’s assessment is that the planned adjustments of 3.1 billion euros in 2014 and 2 billion in 2015 should not be reduced,” it added.