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E6.8bn of bank bailout lumped on to GDP

Monday, October 22 11:22:01

Last year saw Ireland's underlying General Government Deficit fall by 1.6pc to 9.1pc of GDP, according to the Department of Finance today.

However, a negative E1bn more will be loaded on to Ireland's GDP from the bank bailout than had been previously factored in to the forecast, it said.

This is well below the EU-IMF programme limit of 10.6pc, it said.

" We note that this indicates an improved position from the end-March estimate of the 2011 underlying deficit."

The underlying balance excludes the effect of capital injections into financial institutions in 2009, 2010 and 2011 and gives a better picture of the balance of receipts and expenditures of general government. There are no deficit-impacting capital injections in 2008 and 2012.

In July 2011, a net amount of E16.5 billion was injected into Irish financial institutions.

Following the finalisation of the restructuring plans of Allied Irish Bank and Irish Life and Permanent and discussions with Eurostat, it has now been determined that E6.8bn of the E16.5 net injection is classified as a deficit-increasing capital transfer. The effect of this E6.8bn is to add 4.3 per cent of GDP to the deficit for last year. This amount was provisionally estimated in the end-March return at E5.8bn, the Department said.