Sluggish growth a wake-up call for Irish govt - Reuters poll

A protestor waves a tri-color flag outside Government Buildings in Dublin November 24, 2010.

DUBLIN (Reuters) - Economists further trimmed their 2011 growth forecasts for Ireland, a Reuters poll showed on Monday, highlighting the daunting task Ireland's next government faces to get consumers spending again.

Ireland's opposition parties will kick-start coalition talks on Monday, with their first priority to renegotiate with Europe the terms of a rescue package they fear will bankrupt the former "Celtic Tiger" economy.

Regardless of what happens in Brussels, Prime Minister-in-waiting Enda Kenny will have to inflict further budgetary pain on a weary people too concerned about paying off hefty mortgages to kickstart the economy with shopping sprees.

Irish retail sales fell 3.8 percent in January by volume from the previous month as consumers digested large tax increases introduced in the 2011 budget.

Separately, the number of residential mortgages in arrears for over three months jumped by more than 55 percent last year, data from the central bank showed. Over 70 percent of mortgages in arrears are more than six months in the red.

Dublin is relying on its buoyant export sector to deliver gross domestic product (GDP) growth of 1.7 percent this year but the 11 economists polled by Reuters now expect only 1.2 percent growth, down from 1.4 percent in the last survey and from 3 percent in early August before Ireland's debt crisis accelerated.

Both the European Commission and International Monetary Fund expect Irish GDP to grow by just 0.9 percent this year.

Kenny's Fine Gael party and likely junior partners, the centre-left Labour, have both said the past administration's forecasts were too optimistic and analysts say it is now up to them to kickstart activity within the limited scope of the IMF/EU bailout.

"The easy thing would be to revise things down but you're only two months into the year and we haven't even got the Q4 figures yet," Alan McQuaid, chief economist at Bloxham Stockbrokers said.

"I don't think the main onus is the growth forecasts, the onus has to try and influence the forecasts by trying to get activity going. It's not going to change overnight but you can still implement policies."

Fine Gael and Labour have a history of working well together and with both parties keen to quickly complete negotiations, the first item on their agenda may be the deadline to cut the fiscal deficit from 12 percent of GDP to the EU limit of 3 percent.

Fine Gael has committed to hitting that target by 2014 or 2015 at the latest, as agreed under the EU/IMF bailout, but Labour wants to stretch that out to 2016. The economists polled by Reuters sided with the larger party's reading, maintaining their forecasts that Ireland's yawning deficit will fall to 4 percent of GDP by 2014 and 2.8 percent of GDP by 2015.

(Editing by Catherine Evans)