Belfast Telegraph

Government warned on spending cuts

The Government risks strangling the economy by imposing the bulk of 15 billion euro spending cuts in the upcoming Budget, business leaders have warned.

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, Finance Minister 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, which represents Irish business, said a balanced approach was crucial.

"It is important that the upcoming Budget does not deliver an excessive front-loading 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% 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. He said: "The over-riding priority is that we preserve the country's credit worthiness and retain control over our economic affairs."

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