Can Ireland just keep on borrowing to fight the Covid-19 recession?

Smart Money: Controversy rages over how far Ireland can go into deficit to protect the economy

The Government finances have been turned on their head by Covid-19. An expected surplus of taxes over spending of around €2.8 billion for this year is now a deficit of €23 billion to €30 billion. And there are calls for the Government to borrow – and spend – even more to fight the economic fall-out from the pandemic. But when it comes to borrowing, how much is too much?

1. Where we stand

The Government’s spring economic update said that on a plausible scenario, the budget deficit could be €23 billion this year, or €28 billion to €29 billion in a more pessimistic scenario. Recent ministerial statements suggest that expectations for the deficit this year have risen to €30 billion, not far off 10 per cent of expected GDP.

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