Ireland faces high levels of taxation in the medium- to long-term to maintain sustainable public finances, a leading EU economics official said today.
The director general of the commission's economic and financial affairs directorate, Mr Klaus Regling, also warned that the limited budgetary impact of ageing populations is dependent on the success of private pension schemes.
And speaking on the eurozone as a whole, Mr Regling said reiterated last night's comments by EU economic and monetary affairs commissioner Mr Pedro Solbes that at least half of its member states run the risk of unsustainable public finances.
He warned against countries slipping too far into deficit. "The importance of countries reaching and sustaining budget positions of 'close to balance or in surplus' in light of ageing populations cannot be overstated," he said.
He said that even if countries reach these budget targets by 2006 as agreed, "debt is projected to rise above the 60 per cent of GDP reference value by 2040 and hence sustainability remains a concern for the EU as a whole".
If the EU's underlying deficit of around 2 per cent of GDP remains unchanged, debt will rise at a much faster pace, "and the implications for the sustainability of public finances speak for themselves".