'Significant Adjustments' To Economy - Cowen

Taoiseach Brian Cowen has said the country can expect "significant adjustments" despite maintaining that no decision had been made on a mooted €7 billion cut in spending.

Speaking in the Dáil yesterday afternoon, Mr Cowen refused to be drawn on claims the Government is looking at making an adjustment of €7 billion in the forthcoming budget.

"We are consulting with a whole range of international agencies and obviously the European Union as well," Mr Cowen said, before adding, "So when we finalise this in coming days and weeks we will outline the situation in full."

Mr Cowen told RTÉ Radio a number of different scenarios were outlined to Fine Gael and Labour spokespeople when they met with departmental officials earlier this week.

Opposition party Fine Gael has claimed the Department of Finance has petitioned for a €7bn package of savings this year, despite the Economic and Social Research Institute (ESRI) suggest only a €4bn reduction.

The main Opposition party's finance spokesman Michael Noonan said the massive gap demanded an independent review of the exchequer figures.

Yesterday, it emerged the Government would not seek a European Commission extension to the 2014 deadline, by which the State has to reduce its deficit.

A spokesman for the Department of Finance said on Thursday that it was not realistic to extend out the period of adjustment, which could potentially reduce the savagery of the proposed cuts.

The spokesman said an extension would result in more of the State's revenue being used to simply pay interest on the current level of debt. "We cannot allow this to happen", he said.

"We (and other countries) have also agreed a 2014 timeline with the EU Commission, and the government remains committed to this."

However, the Economic and Social Research Institute (ERSI) said it was concerned that the attempt to reduce the budget deficit to 3% by 2014 could tip the economy into a deflationary spiral of low growth and high unemployment.

The institute said that according to its calculations, savings of up to €€15 billion could be needed - twice the sum that was under discussion at the time Ireland and the Commission agreed to the 2014 deadline.

(DW/BMcC)