The government have released a ten-page document outlining its plans for the level of adjustment in the upcoming budget and also some details on growth projections and adjustments planned for future years. Here‘s the press statement.
The Government has agreed on an adjustment of €6 billion for 2011 and this will reduce the General Government deficit to around 9¼ to 9½% of GDP next year. Taking account of the €15 billion consolidation package, my Department now expects annual average real GDP growth to be 2¾% over the 2011 to 2014 period.
The government have also released a note on the accounting treatment of the promissory notes. The key point:
the terms of the promissory notes will provide that no interest will be chargeable in 2011 and 2012.
I’m guessing these are newly-negotiated terms, though I’m happy to be shown that this is not the case.
In any case, the bottom line is that this €6 billion of adjustment will have slightly more effect on the GGD than the approach I had been recommending. I had been recommending €7 billion but that figure included €1.5 bilion for the promissory note interest, which does not apply now.
There is lots to absorb in this plan but, for now, let me say that I think the govenment have taken the right decision in relation to the size of the planned adjustment. Now we just have to see if they can get it passed.