Ballooning deficit

I make reference to the article on the ballooning deficit which appeared in The Sunday Times yesterday.

I would like to clarify that I did not make any fresh predictions of how the deficit is expected to end this year.

Not on a summer Saturday afternoon, anyhow.

The figure of €180 million was deduced by the journalist, who combined my last October budget time prediction with the 2007 end-of-the-year estimate of the deficit.

That is not the same as making the projections today.

The gist of the argument well developed in the article is that governments may guarantee their expenditure outlays but they cannot do the same for the revenues. At budget time last year it was very obvious that the revenue figures for this year were overly optimistic.

For the time being I would prefer sticking to my past projections which estimate an increase of €60 million to €73 million over and above the budgeted deficit figure for this year (€68 million).

This would take us back to over the two per cent of GDP figure, though well within the Maastricht three per cent benchmark.

Whichever figure we go for, it is clear that drastic corrective fiscal measures are needed if we are to end the year in a fiscal situation not much worse than last year.

Of course we should not expect to see surplus budgets before 2012.