Brian Cowen (Laois-Offaly, Fianna Fail)

Of course we stand over the figures in our budget. The Commission's forecasts are pessimistic for the European Union as a whole. The report confirms that the euro area is already in recession. The outlook, therefore, across all the European Union for next year is similar.

The forecast for the Irish economy published by the Commission yesterday is broadly in line with that of the Department of Finance, which underpins the budget. The Commission is forecasting negative GDP growth of 1.5% this year and that the economy will contract by a further 1% next year. The Commission is also forecasting a fall in the rate of the harmonised index inflation figure in Ireland over the coming months, with further easing expected in 2009-10. These forecasts are broadly in line with those published on budget day. This easing in inflationary pressures is a welcome development at this time.

On the budgetary position, the Commission notes that our expected deficit of 5.5% of GDP this year largely reflects the very large tax shortfall. The Commission expects the deficit to widen next year to 6.75% of GDP and 7.2% in 2010 on a no-policy-change basis. That forecast does not take into account the commitment to restore the current budget to balance over the coming years, as included in our budgetary arithmetic.

The medium-term strategy underpinning the budget set out the clear intention of stabilising and restoring balance to the public finances as soon as possible by, among other steps, reducing and prioritising public expenditure and adjusting taxation levels to reflect the changed realities. The Commission's analysis confirms our own stated position that tough decisions will continue to have to be taken over the coming years. The aim of our budget was to seek to stabilise the public finances. Over the next three years, our aim is to restore sustainability thereto.

The Commission shares our optimism in respect of a return to growth in 2010. It forecasts a growth rate of 2.4%, the third highest in the EU, for Ireland in that year. This must not be overlooked as we face these challenges with a strong position from our low ratio of debt to GDP. The answers to the Deputy's questions are technical.

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