THE MINISTER for Finance, Brian Lenihan, has said the deficit of €4.7 billion projected in the budget for 2009 will now be exceeded in the light of the deteriorating economic situation.
Mr Lenihan, who yesterday made a statement on the economy to the Seanad, acknowledged publicly that the deficit would be greater than previously predicted.
He also said it was likely there would be a short period of deflation next year, although he added that this could protect "real incomes and support consumption".
Outlining the current situation to Senators, the Minister said the State was in "very difficult times" and described the pace of the downturn as very rapid.
Mr Lenihan also expressed concern at how quickly the rise in unemployment had occurred.
"The number on the live register reached 277,000 in November, the highest level since 1996. The pace at which the live register has deteriorated is of particular concern.
"The number of people on the live register increased by two-thirds in the year to November, an unprecedented rate of increase."
The scope for fresh tax increases was limited, he said, and his focus would be on cutting public spending and the work of the group he has established to look at public service numbers and expenditure.
He defended the number of public servants in the group, saying that the criticism formed "part of a general denigration of the public sector that has become a feature of public debate in recent months." His comments were seen to be directed at Fine Gael.
The Minister criticised the lack of flexibility in reallocating staff within the public service, saying it had to change. He also pointed out that the numbers employed in the public service had increased by 11 per cent since 2004. That could no longer be sustained.
His comments came as the leader of the Labour Party, Eamon Gilmore, unveiled proposals to ensure that no families would lose their homes due to the recession.
Mr Gilmore said the country faced a frightening increase in the number of repossession orders for family homes in the new year.
"I understand that legal representatives for the financial institutions are currently preparing an unprecedented number of applications for repossession of family homes but are holding off on actually going into court until Christmas is over."
He said the Government should follow the lead of the British government. The prime minister, Gordon Brown, this week announced a plan agreed with British financial institutions that would allow homeowners defer mortgage interest payments for up to two years.
"It is time that similar action was now taken in this country to protect families from the loss of their homes. If the taxpayer can go guarantor for the banks then there should be a similar guarantee for families," said Mr Gilmore, who was speaking at a lunch organised by the Public Relations Institute of Ireland in Dublin. He proposed a number of options including a deferral on mortgage payments; the introduction of lease-back arrangements; and shared equity deals with local authorities.