BELFAST BRIEFING:A new study shows the scale of the economic problem that Northern Ireland has to deal with, writes FRANCESS McDONNELL

WHAT IS the difference between Greece and Northern Ireland – and no, it is not a trick question.

The answer, national stereotypes aside, is several billion euro – although it is anybody’s guess as to what the exact amount might be.

The Greeks, who have set new Olympic records for budget deficits, might be surprised to find that any other country could be in a worst position than they are when it comes to spending money they did not possess in the first place.

But they would have reckoned without Northern Ireland and its gold medal-winning ability to find someone else to pass the bill to – normally the UK Treasury.

Greek’s budget deficit is estimated to be 13.6 per cent of gross domestic product (GDP).

An economic study produced by Ulster Bank has just revealed that, in comparison, the North’s fiscal deficit could be as high as 32 per cent of GDP.

The bank concedes that it is unfair to compare national deficits with regional ones. But then when have budget deficits ever been fair?

The Ulster Bank has put together some figures that rate the scale of fiscal deficits in what it describes as the sterling zone.

It makes for depressing reading in relation to the North.

The bank has uncovered that five UK regions have an annual deficit that tops that of Greece.

In Northern Ireland’s case, its deficit is estimated to be more than 2.5 times higher.

Why are these figures relevant if they do not really compare like with like?

Because they show exactly the scale of the economic problem that Northern Ireland has to deal with.

The North’s Executive may not have to find the money to try and fix its fiscal deficit problems like the Greek government but it’s financial outlook is just as precarious.

Northern Ireland currently receives about £9 billion in annual budgets from the UK.

Historically the North has always received more public money per head of the population from the UK Treasury.

At the same time it has traditionally produced less revenue per head of the population compared to other parts of the UK.

What this adds up to is that Northern Ireland consistently spends more than it earns so it is not hard to see why a Greek-style tragedy could be on the cards when it comes to further UK public spending cuts.

These will likely be unveiled later this month when the coalition government publishes its emergency budget.

Richard Ramsey, Ulster Bank’s chief economist, believes that the North could be looking at up to £1.5 billion in spending cuts over the next four years.

He says this is going to pose a major challenge for the local “public expenditure driven economy”.

Latest economic analysis suggests that public expenditure in the North accounts for more than 70 per cent of local economic output.

According to Ramsey, the immediate outlook for Northern Ireland is grim even without the impact of any further budget cuts.

He estimates the economy contracted by at least 4.5 per cent in 2009 and says there has been a much weaker recovery in the first half of this year than had been previously anticipated.

Ramsey reckons Northern Ireland will be doing well if it sees growth of less than 1 per cent this year.

In his opinion the North will “struggle to get out of first gear in its economic recovery”.

There is no escaping widespread and severe public expenditure cuts. In fact there is a school of thought in Northern Ireland that, in the long run, it could help transform the local public sector and the local economy.

But as Joanne Stuart from the Institute of Directors has repeatedly warned, reform will come at a price.

Stuart says there is wide agreement that the balance between public and private sector employment in Northern Ireland needs to be changed.

“Until now there has been no consensus about how to achieve such a step-change within a realistic timetable and there is little understanding of how such a shift could open up scope for creating more jobs,” she says.

According to Stuart and the Institute of Directors, there is scope for private-sector money and expertise to be used more widely to secure high-quality, value-for-money, services.

She says it is time for the Executive to organise a “radical and strategic review” of how public services are delivered in the North.

Otherwise, Stuart says, local politicians might be forced into making “hasty decisions” to save money, which could further damage the local economy in the long run.