The European Commission has today given Ireland until 2013 to bring its budget deficit below 3 per cent of gross domestic product (GDP).
Britain, France, Spain and Greece have also given additional time to correct their swelling budget deficits.
"National budgetary positions in the EU and elsewhere have deteriorated considerably in the last year and are set to deteriorate further on account of the economic crisis we are living through and the discretionary measures rightly adopted by Member States to sustain demand and promote investment,” said Economic and Monetary Affairs commissioner Joaquín Almunia today.
“To limit the costs of the debt for generations present and future, it is crucial that governments devise an adjustment path whereby they commit to correct public deficits from the moment the economy starts to recover, which is expected to happen gradually in 2010.
"The Stability and Growth Pact provides the framework for this exit strategy and a return to sound and sustainable public finances in the medium-to-long term," he added.
While general government debt in Ireland stood at 40.6 per cent of GDP in 2008 - below the 60 per cent reference value - the exchequer deficit reached 6.3 per cent of GDP.
According to the Commission's January forecasts, this deficit is expected to widen to 11 per cent this year and to 13 per cent in 2010 on the assumption of no new Government measures.
The Commission said that in view of the” very weak economic situation” in Ireland and the size of its deficit, a multi-annual deadline for the correction of the excessive deficit was warranted.
The European Commission said France and Spain should cut their ballooning budget deficits below 3 percent of gross domestic product by 2012 while Greece should do the same by next year.
The EU's executive arm said Britain should cut its excessive deficit back below the 3 per cent ceiling by 2013/14.
The recommendations are the first indication of the flexibility with which EU budget rules, the Stability and Growth Pact, are applied by the 27-nation bloc amid the worst global economic and financial crisis in living memory.
The Commission has said it would follow EU rules in starting disciplinary steps against countries exceeding the 3 percent limit, but would be flexible in setting the deadlines for reining in the gaps because of the severity of the crisis.
Additional reporting: Reuters
