Ireland to target deficit below 6% with big budget package - source

(Reuters) - Ireland will aim to cut its budget deficit to just below 6% of gross domestic product next year while at the same time offering a large budget day package for those hit hardest by the COVID-19 crisis, a source familiar with the process said on Monday.

Ministers will announce the new measures on Tuesday, with a narrower than forecast budget shortfall this year allowing more room to cushion the impact of some of Europe's toughest COVID-19 restrictions and prepare for a possible no trade deal Brexit.

Ireland's budget deficit is set to hit 6.1% of GDP this year and the finance department forecast last week that it would fall to 4% next year if no additional measures were announced in the budget for 2021.

The government will use the leeway to add around 5 billion euros in current and capital expenditure above what is already allowed for and set aside over 3 billion euros in a recovery fund for Brexit or COVID-19 hit firms, the source said.

A deficit below 6% would meet Finance Minister Paschal Donohoe's aims of keeping Ireland's fiscal position in line with other European Union member states and signalling a return to a broadly balanced budget over time.

(Reporting by Padraic Halpin; Editing by Jon Boyle)