The Government risks strangling the economy by imposing the bulk of €15 billion spending cuts in the upcoming budget, business leaders warned today.
Employers' group Ibec said it was critical savings are spread out over the next four years and not excessively ‘front-loaded’ in the budgetary plan to be revealed in December.
Last week, Minister for Finance Brian Lenihan insisted a significant amount of the pain will be taken upfront, while Taoiseach Brian Cowen agreed the move was necessary to please international money markets.
But in its latest forecast, Ibec said a balanced approach was crucial.
“It is also important, however, that the upcoming budget does not deliver an excessive frontloading of the fiscal adjustment to such a degree that it strangles the fledgling economic recovery,” it stated.
Ibec chief economist Fergal O’Brien said the economy will grow next year despite the scale of austerity measures being imposed.
"Although we have pared back our forecasts somewhat to reflect the impact of a series of more difficult than expected Budgets, we still see the economy growing by over 2 per cent in 2011,” he said.
Mr O’Brien said the economy performed better than expected this year. Economic recovery in trading partners like Germany along with a reduction in the cost of living in Ireland had boosted export business, he said.
Mr O’Brien added while it was necessary to cut the national deficit over the coming four years, it was also important to balance the cutbacks with stimulating growth.
“The over-riding priority is that we preserve the country’s credit worthiness and retain control over our economic affairs,” he said.
PA