Likely Irish coalition partners in debt row

Ireland's main opposition parties, overwhelmingly tipped to form a new government within weeks, were at loggerheads yesterday over when the country should reduce its budget deficit to meet European Union limits.

The centre-left Labour Party, a likely strong junior partner in the next administration, urged the EU on Sunday to look towards giving Ireland until 2016 to bring its fiscal gap down to 3 per cent of gross domestic product.

The European Commission has already given Ireland an extra year, until 2015, to get the eurozone's worst deficit under control, and the centre-right Fine Gael party said it was vital to stick to that timeframe.

Fine Gael communications spokesman Leo Varadkar said Labour's proposed move would increase Ireland's borrowing needs and raise the national debt, and that his likely future cabinet colleagues were "not ready for government".

He continued: "Up until now, it was the Labour Party policy to commit to getting the deficit down to 3 per cent of GDP by 2014 or 2015 at the latest. What's changed?

"What's changed is that the Labour Party have finally looked at the books, they've realised the public won't stomach their plans to increase taxes and they've realised their supporters in the trade union movement won't accept their plans."

As part of an €85 billion (73bn) EU/IMF bailout, Ireland has pledged to radically reduce its fiscal shortfall, estimated at nearly 12 per cent of GDP last year, or 32 per cent including a one-off hit from aid given to the country's banks.

Highlighting the scale of the task, the Irish central bank forecast the economy will grow just 1 per cent in 2011, well shy of the government's 1.7 per cent growth target.