"The country's budget deficit will balloon to 32 percent of gross domestic product this year, but Ireland aims to cut it to the European Union-agreed 3 percent by 2014, the Finance Ministry said.
The government will announce later on Thursday plans to recapitalise Allied Irish Banks, the central bank said. Dublin already has a near 19 percent stake in the lender."
There is a price to pay for overspending.
If the budget deficit continue to grow, and the government fail to sell government bonds, the government will have the risk of hyperinflation, because the only way to cover the deficit is printing money. What the government should do is reduce government spending and increase taxes. These fiscal reforms will reduce the need for seigniorage, which allows a reduction in money growth.
ReplyDelete