Michael D Higgins (Galway West, Labour)
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Question 133: To ask the Minister for Finance his views on the Economic and Social Research Institute's latest forecast, in their most recent quarterly economic bulletin, that the general Government balance is set to reach 12.8% in 2010, and that the debt to gross domestic product ratio is set to reach 75.7%, excluding the National Asset Management Agency, that this could be significantly higher depending on the level of capital injections into the banking system here; and if he will make a statement on the matter. [37701/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In the April Supplementary Budget my Department published economic and fiscal forecasts for the 2009-2013 period: since then there has been a further decline in the fiscal position in 2009 due to a shortfall in expected tax receipts in the region of €2 billion. It is now expected that the General Government Balance for 2009 will be approximately -12% of GDP, as opposed to -10 3⁄4% of GDP forecast last April. The updated position was notified to Eurostat as part of the end-September Maastricht Returns. Details were also published on the Department's website. The deterioration in the 2009 position will obviously impact on the outlook for 2010.

I am aware of the views of the ESRI, as recently stated in its Quarterly Economic Commentary, as I am of other forecasts. In broad terms, the views of most forecasters are within the range of the current workings of my Department. In the coming weeks my Department will publish a technical pre-Budget forecast GGB and GGD for 2010 as part of the Pre Budget Outlook. However, I have already indicated that the Government's aim in the December Budget is to stabilise the Deficit at the 2009 level. This will not be an easy task although the Government is endeavouring to do through a series of processes including our recent ongoing engagement with the Social Partners.

It should also be noted that the Gross Debt position does not take account of the fact that the NTMA had cash balances at the end of September in the region of €25 billion, or of the €20.9 billion assets of the National Pensions Reserve Fund, which substantially reduces the country's Net Debt.

The main reason for the increasing level of government debt is the need to borrow to bridge the gap between the high level of government spending and declining tax receipts. At present we have to borrow the equivalent of €500 million per week to meet existing commitments. We cannot afford to continue to do this and so we will take corrective action in the forthcoming Budget to return the level of public spending to a more sustainable level.

It is likely that some institutions will require additional capital in order to absorb the losses arising from the transfer of their impaired assets to NAMA and in order to maintain appropriate levels of capital, although the Government would expect such an institution to explore all available options for raising such capital. It is the Government preference that private market solutions are found and implemented. The banks and building societies will be expected to increase the equity component of their capital base as the NAMA asset transfers are implemented.

To the extent that sufficient capital cannot be raised independently or generated internally, the Government remains committed to providing such banks and building societies with an appropriate level of capital to continue to meet their requirements. This will be done in a manner consistent with EU State aid rules and the credit needs of the Irish economy.