Ireland had the largest budget deficit in the European Union region last year, new figures revealed today show.
According to European statistics office Eurostat, the country's budget deficit was 14.4 per cent of gross domestic product (GDP) last year, ahead of Spain at 11.1 per cent and Portugal at 9.3 per cent.
Ireland's deficit is set to rise to an unprecedented 32 per cent this year due to the one-off costs associated with the bank bailout.
Data for Greece was not included in the report, as it is still being assessed for quality, and will be published next month instead.
In the wider European Union, the UK came in second to Ireland, recording a shortfall of 11.4 per cent of GDP. The British government this week announced a raft of spending spending cuts intended to reduce the country's deficit and allow it to begin repaying debts.
Luxembourg had the smallest shortfall, at 0.7 per cent.
Some 24 member states recorded a worsening in their government deficit relative to GDP in 2009 compared with a year earlier. Only two - Estonia and Malta - showed an improvement.
Ireland was among the 11 states that had a debt to GDP ration in excess of 60 per cent at the end of 2009, at 65.5 per cent. This compares with 116 per cent in Italy, 76.1 per cent in Portugal and 68.2 per cent in the UK.
European finance ministers agreed on October 19th to toughen sanctions for breaches of fiscal rules, though stopped short of more automatic penalties some countries had demanded.
The Government has committed to reducing the current budget deficit to 3 per cent of gross domestic product by 2014. It yesterday reaffirmed this commitment, despite the concerns expressed by the Economic and Social Research Institute (ESRI) that it might be more feasible to extend the target for another two years.
Taoiseach Brian Cowen said that extending the deadline would only increase the national debt and the debt repayments.
A combination of the economic slowdown and the cost of bailing out the banks is partly repsonsible for the ballooning national debt.
The Government is expected to announce an adjustment of €4.5 billion in the upcoming budget.
The State is also facing an interest bill of about €7 billion on its national debt next year, it was confirmed yesterday. Speaking to the Dáil’s Committee on Public Accounts, the Department of Finance's secretary general, Kevin Cardiff, agreed under questioning that an estimate of €7.5 billion was “about right” for the interest bill faced by taxpayers on the national debt.
Committee member, Deputy Sean Fleming, estimated that, taking into account the €50 billion bill for bailing out the banks, the national debt would hit €150 billion at the end of the year, an estimate with which Mr Cardiff agreed.
On the basis that the Republic is paying an average interest rate of just under 5 per cent, Mr Fleming said this implied €7.5 billion to cover the interest alone.
Mr Cardiff estimated that the promissory notes the Government intends to use to fund the bailout of Anglo Irish Bank, the EBS and Irish Nationwide would cost €30 billion.
He said that the National Treasury Management Agency (NTMA), which is charged with managing the State’s debts, will borrow €3 billion a year over the next decade to fund the notes, which are legal promises to provide the finance to the banks as they need it.