I'm relatively relaxed about the deficit. The real number to look at is the current deficit, €10bn in 2012. In the longer term, deficits of about €3bn a year would be sustainable at our level of GDP. So we're probably €7bn over target before the measures from last year's, this year's and next year's budgets kick in.
Of that €7bn, about €2bn is interest in respect of bank bailouts - I hope we never attempt to balance our books to service this (not to mention pay down the capital!) unless we are seriously flush with cash.
If the global economy eventually returns to any kind on normality, we should see at least 150,000+ people return to work. Between reduced social welfare and higher income tax, this would reduce the deficit by about €3-4bn.
My position is that we should not now levy taxes and set public sector wages and social welfare rates to immediately balance our books because:
1. Some level of current deficit is tolerable
2. We shouldn't be setting up the economy to service the bank bailout
3. We shouldn't be setting up the economy to have a balanced book in midst of the worst recession ever
4. There is a planned schedule of budget adjustments already in place and there's little point in accelerating or extending these.
In short, We have to look at what would be a long term sustainable position if we were in a normally functioning economy i.e. no massive debts, lower unemployment rates, etc and aim towards an equilibrium in that scenario. There's no point in trying to overshoot budget corrections or we'll simply destroy the domestic economy.
The weakness in this argument is what happens in a low growth scenario where we become swamped in debt, but I believe that we're done for regardless if we cannot grow and inflate away the debt.