A cut greater than €3.5 billion cannot be ruled out in the forthcoming budget, secretary general of the Department of Finance John Moran has said.

Speaking at the Oireachtas Finance Committee yesterday, Mr Moran left open the possibility of a harsher budget than planned this December, saying growth forecasts could impact on the budget.

Asked if forecast revisions would have any impact on the budget, Mr Moran said: “Growth is a key variant in how you do calculations.”

He also indicated the Government would most likely follow the European Commission in lowering Ireland’s growth forecast.

Responding to a question from Fianna Fáil TD Michael McGrath on yesterday’s downward revision of Ireland’s growth forecast by the European Commission, Mr Moran said “we expect to have to revise them downwards”.

Mr McGrath had said the Department of Finance’s growth forecast for 2012 was still at 0.7 per cent, compared to the commission’s forecast of 0.4 per cent.

Mr Moran said the bank guarantee scheme would probably be lifted early next year.

“We have seen a considerable amount of stability in the deposit market in Ireland in the last few months. That has set us up for the removal of the bank guarantee scheme in the early part of next year. Each bank will have to make their own decision if they want to continue with the guarantee or not.”

The Eligible Liabilities Guarantee which came into force in December 2009 superseded the original blanket guarantee scheme introduced in September 2008. The guarantee is subject to review and approval by the European Commission every six months.

Mr Moran said the removal of the guarantee would not cause a hole in public finances.

Mr McGrath asked Mr Moran where growth would come from domestically when unemployment still remained stubbornly high at 14.8 per cent.

“There is always going to be a lag between the appearance of growth and jobs. We are doing an analysis of the economy sector by sector to see how each sector can outperform their international peers.”

Asked about the department’s plans for selling the State’s shareholdings in various financial institutions, he indicated the priority would be to find a buyer for Irish Life.

“I would prefer to sell a life company before I sell the banks. We own a large part of the insurance industry . . . the banks are not for sale.”