Beyond the bailout

 

Ireland has to date met the terms of the EU-IMF bailout, but that does not guarantee a successful exit from the troika programme later this year. If that does happen, the Government will again assume responsibility for the management of the national finances. However, the recovery of economic sovereignty may well prove more apparent than real. Certainly, it will allow the Government some limited scope to soften the impact of austerity. But the Government cannot relax efforts to bring the public finances back into balance, and to reduce the high level of public debt.

Figures from the Central Statistics Office and the Department of Finance this week have indicated the scale of the ongoing challenge: in 2012, a €12.4 billion gap between what Government raised in taxes and spent, and this year, general Government debt is set to exceed €200 billion. After five years of austerity measures, much progress has been made in repairing the national balance sheet. Equally, very many people have paid a heavy price for that necessary economic adjustment – in higher unemployment, emigration and lower living standards. Much work remains to be done.

Whether the Government can exit the bailout programme will depend greatly on the state of the global economy and on the condition of financial markets by year-end. After leaving the programme, a route map for the journey ahead – an economic plan for this new departure – will be needed. The State’s ability to borrow on acceptable – affordable – terms will be determined by how the Government, post-bailout, manages the economy, and how it mobilises scarce resources to best effect. The Government, by putting a coherent economic plan in place and outlining its intentions, will help to focus minds at home and to reassure foreign investors of its seriousness in restoring the State to full solvency.

Admittedly, the Government has limited room for manoeuvre. Ireland relies greatly on an export-led recovery for growth, but for 2013 the outlook in its main export markets is poor: no growth in the euro zone economies, at best modest growth in the UK and moderate growth in the US. Nevertheless, the Government can influence what is within its control. Here, the focus, as Minister of Finance Michael Noonan, rightly, has said must be on investment for jobs. The Government’s decision to use the residue (up to €6 billion) left in the National Pension Reserve Fund for that purpose could provide the cornerstone for such an economic plan. In the late 1980s, faced with a similar, albeit less daunting, crisis involving high debt and low growth, the domestic political response paved the way for economic recovery. In the current, and even more challenging environment, an economic plan by Government should attempt to do likewise.

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.