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Maastricht Returns – Ireland’s underlying deficit outturn of 9.4% in 2011

The Minister for Finance, Michael Noonan T.D., noted the publication of the end-March Maastricht returns for Ireland today (23rd April 2012) by Eurostat and the publication of the key tables and information note on the Department of Finance website.

On publication, the Minister stated:

The Maastricht returns published today give the first official outturns for the general government deficit and debt position in 2011. These returns highlight that the underlying deficit (the deficit excluding the capital injections into the banks) came in lower than expected at 9.4%. This compares very well to a target of 10.6% under the EU - IMF programme and the budget day estimate of 10.1%, especially giving the significant global slowdown in the second half of 2011.

The return of the underlying deficit to single figures is a positive development and reflects the very strong progress that has been made in restoring order to our public finances. This progress has been due to the very significant adjustments that the Irish people have taken over the past number of years. The Government appreciates that this adjustment was not painless and as the Programme continues to reduce the deficit to under 3% by 2015, the Government will ensure that future expenditure cuts or tax increases continue to be applied fairly.

Building upon the strong start to 2012 as reflected in the Quarter 1 exchequer returns we are on track to meet the 8.6% target. Today’s figures include a preliminary general government deficit estimate for 2012 of 8.2%. However, this estimate is only an early point of time estimate and the Government remains committed to a general government deficit of not more than 8.6% of GDP for 2012 and is satisfied that based on data for the first three months of the year that the budgetary plans are on track.

The Minister noted that as a result of the statistical reclassification of a portion of the capital injection into the banks the headline deficit was 13.1%. This classification was on foot of the examination announced last September and this once off reclassification has no impact on our debt outturn, nor on the deficit target for 2012 as it was always reflected in the general government debt.

The Minister also noted the Eurostat reservations. The first reservation relates to the fact that restructuring plans for AIB and IL&P have not yet been finalised. This delay is related to the need to await the outcome of discussions with the EU – IMF regarding the future strategy for Irish Life and Permanent before its restructuring plan is finalised. When these plans are finalised, this reservation will be lifted and this is anticipated to be resolved before the next notification in September.

The Minister also noted the reservation in relation to the ownership of the NAMA SPV, which the Department had previously acknowledged. He is not concerned by the reservation as the sale of the Irish Life shareholding to private investors has just been agreed. It is anticipated that the transaction will be completed in the coming weeks and this will ensure that the reservation will be lifted and the statistical treatment of NAMA will be unchanged. The effect of the sale will mean that NAMA will continue to have absolutely no General Government impact. In addition, it is worth noting that provisional figures indicate that NAMA has posted a profit of €200m in 2011 and has very sizeable cash reserves.

An Information note is available on the Department of Finance website

23rd April 2012