May’s exit creates headache for Ireland’s economic planning

Paschal Donohoe now has to do his Budget 2020 planning in a Brexit vacuum

Theresa May announces her resignation as Conservative Party leader. Photograph: Yui Mok/PA

Theresa May announces her resignation as Conservative Party leader. Photograph: Yui Mok/PA

 

Theresa May’s decision to resign as Tory Party leader on June 7th and the setting in train of a Conservative leadership contest is a big headache for Ireland’s economic planning.

It now looks certain that nothing substantive will happen to break the Brexit logjam between now and September, as the leadership drama plays out. With an end-October deadline set for the UK’s exit from the EU, a period of significant chaos and uncertainty – similar or possibly worse than what we saw in March and April – is in prospect as we enter the autumn.

The new Conservative leader will face the same issue as the outgoing one: that a majority in the House of Commons are opposed to a no-deal exit, but there is no majority for an approach that would avoid this outcome.

No doubt we will hear all kinds of “solutions” and promises to take a tough line with Brussels in the leadership contest, but the EU side has made clear that it is not for moving. The Irish Border issue will be front and centre in this debate. The EU and UK sides are now most unlikely to re-engage until after summer break, some time in September.

So Minister for Finance Paschal Donohoe will have to do his Budget 2020 planning in a Brexit vacuum, initially with the summer economic statement, due out next month. A no-deal Brexit would hit growth and tax revenues.

With the budget due to be presented before the crucial EU council meeting in mid-October, which would consider any extension request, Donohoe risks putting in place spending plans based on revenues that are vulnerable if growth slows due to a hard Brexit.

On most forecasts, a hard Brexit would clearly take a heavy toll on 2020 growth and the OECD recently warned that it could plunge Ireland into recession.

The Irish economy continues to perform well. Jobs growth ran at a record level in the first quarter and the public finances are likely to remain strong – all of which will maintain pressure for more Government spending.

How Donohoe and the Cabinet handle this issue poses a real political dilemma.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.