The latest exchequer returns and the strong job creation performance of companies supported by IDA Ireland show that the economy remains solid entering 2015. In many ways our performance is at odds with the poor economic conditions evident elsewhere in the euro zone. While this outperformance is encouraging, the threat of a deflationary recession across Europe is a concern and one which argues for some caution.
The small size of our economy and our economic links with the faster growing US and UK economies have ensured that growth here has continued at a rate well ahead of the rest of Europe, even if the official figures overstate somewhat the level of expansion. The most obvious dividend of this growth is the rise in employment. The latest results from IDA Ireland show a net increase of more than 7,100 in employment in IDA companies last year.
CSO data shows that employment is also rising in many other sectors and that employment is rising, even if parts of the domestic economy still remain flat. Of all the Government’s tasks in 2015, doing whatever possible to maintain this upward jobs trend is one of the most important.
A large part of this involves maintaining a stable economic environment. There is little the Government can do about the threat of European deflation, or turbulence spreading from events in Greece, apart from making the case at EU level for appropriate policies. But it can continue to do the basics – keeping the budget figures on target and maintaining control on spending.
The latest exchequer figures show targets set for 2014 have again been beaten and that borrowing levels continue to fall. This is welcome. But with some signs of pressure on spending and taxes vulnerable to any slowdown, meeting the target again this year cannot be taken for granted.
As the general election draws closer, the Government cannot afford to be drawn in to some kind of auction. Already there is a touch of unreality in the political debate about what is achievable and when. We cannot, for example, afford to abolish the Universal Social Charge, or push up spending across the board. If growth continues, there may be some dividend available when framing the 2016 budget, but promises made by the Taoiseach, the Tánaiste and their ministers have already more than accounted for any likely spare cash. Meanwhile the Opposition is long on ways to cut tax and spend more and short on ways to raise the money to pay for this.
The recovery is still fragile and many are still not feeling significant benefits, but in addressing this we need to keep the focus on maintaining the stability which is allowing employment to rise steadily. In developing policies for an election campaign, all sides of the political divide need to heed the old medical maxim – first do no harm.