Ireland will face fines of up to €330m per year for maintaining high public debt levels, if new proposals on fiscal stability are adopted by the European Parliament.

The total bill for our over-borrowing could reach €4bn, as Ireland is unlikely to get below the required EU debt threshold until after 2020 – giving us at least a decade of clocking up penalties.

Olli Rehn, EU commissioner for economic and monetary affairs, is expected to introduce legislation this week imposing steep financial penalties on countries with large public debt loads.

Fines of up to 0.2% of gross domestic product (GDP) could be levied on governments which fail to keep debt below 60% of economic output.

Ireland's GDP for 2009 was just over €166bn. An annual fine based on that figure and our current borrowings would be €332m.

Ireland's general government debt, which includes borrowings to fund both the tax shortfall and the bank bailouts, is expected to peak at close to 100% of GDP in 2011 and remain elevated as the state gradually brings deficits under control and pays back billions in bonds. Analysts believe the debt level will not drop below 75% of GDP before 2020, meaning any fines could continue for 10 years or more.

Other fines giving the EU more control over annual deficits and economic competitiveness are also included in the new legislation, according to reports

The EU proposals are a response to the sovereign debt crisis in the eurozone, which reached a critical stage last spring when Greece flirted with insolvency.

The panic prompted the EU to create the European Financial Stability Fund – a €400bn backstop – to shore up confidence in highly indebted peripheral countries such as Ireland, Portugal and
Spain.

The new rules are also designed to whip eurozone members back into line with the Stability and Growth Pact, which limits eurozone countries to a maximum 3% annual budget deficit.

Ireland's budget deficit this year will probably climb above 25% when bank recapitalisations are included. Excluding the bank bailout the deficit is still a Europe-leading 11.6%.