Call for EU to give Ireland 'extra year' to cut defecit

The European Union needs to seriously consider giving Ireland an extra year, until 2016, to bring its budget deficit down to the EU limit of 3 per cent of gross domestic product, Ireland's Labour Party has said.

As part of an €85 billion EU/IMF bailout, Ireland has pledged to radically reduce its shortfall, estimated at nearly 12 per cent GDP last year, or 32 per cent when a one-off hit from aid given to the country's banks is included.

Labour, likely to form a new coalition government with main opposition Fine Gael after an election due to be held in the next month, said yesterday the current deadline risked further delaying a return to sustainable economic growth. "It is an option that needs to be seriously considered in order to grow the economy," Joan Burton, the party's finance spokeswoman said.

"We are looking at that possibility because the key to getting the economy back is this mix between dealing with the deficit but getting some growth back in that you have some return of consumer confidence."

Ireland is relying on export-led growth to help it replenish state coffers laid bare by a property crash.

This year the government is targeting a budget deficit of 9.4 per cent of GDP and has pledged to bring it below 3 per cent by 2014, a target Fine Gael has signed up to.