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THE GOVERNMENT HAS been urged to be “prudent” in October’s Budget by Acting Governor of the Central Bank, Sharon Donnery.
In her annual pre-Budget submission letter to the Minister for Finance Paschal Donohoe she said such an approach will be “critical” to ensure Ireland has “room to manoeuvre” and is buffered against any future downturns in the economy.
However, if windfalls are going to be to be used, they should be used to reduce Ireland’s debt, which stands at just over €200 billion.
The national debt rose to €206 billion last year, an increase of €5 billion, according to a government report published this month.
The annual report on Public Debt states this is the equivalent of €42,500 for every person living in the State, one of the highest in the OECD.
The national debt is about four times what it was before the recession.
The Central Bank advice follows on from the National Treasury Management Agency (NTMA) stating that the chances of a recession in Ireland are 100%.
National debt
The acting governor noted the importance of reducing public debt in the current favourable financial market conditions, stating that fiscal windfalls, including those from corporation tax, could be ring-fenced to play a part in reducing the public debt burden.
She urged that earlier proposals made in Budget 2017 to introduce an Irish specific debt target of 45% of GDP “should be formalised by the government as soon as possible”.
Addressing the “specific substantial challenges” facing the country, she said the potential impact of a no-deal Brexit would have an immediate and severe impact on almost all areas of economic activity.
She said certain sectors such as agriculture, food production and manufacturing which have particularly strong links to the UK will be “disproportionately affected by the imposition of tariffs and non-tariff barriers such as increased border delays and significantly increased administrative requirements for firms exporting goods both to the UK as a final destination and through the UK to continental Europe”.
If a disorderly Brexit can be avoided, the economy is expected to perform strongly in 2019 and 2020. However, she warned the government that there is a “material risk that continued expansion would give rise to overheating pressures”.
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Proper economic prudency… Save during a boom and spend during a downturn… keynesian economics 101….
@Finbarr Barry: Was he not just spend spend spend?
@boymatty890: No
@Finbarr Barry: It was Keynesian economics that got us into this mess in the first place. When Governments have free reign to try and interfere in the markets as substantially as they have since 2008, the markets end up being way over-inflated and as we are about to see the ‘everything bubble’ will soon burst in a far more spectacular fashion than in 2008. Free markets should have been allowed to stay free rather than Central banks propping up the markets. We now have the longest business cycle in history, meaning we’ll most likely have an equally extreme recession/full blown economic crisis. Poor management not taking the hit in ‘08.
@Burn_the_Witch: You are 100% right, Get outta Euro
Buy Gold and Silver.
@tomcfearon@gmail.com: oh dear.
@tomcfearon@gmail.com: Our debt is in Euros. If we were to exit the Euro now we’d be in terrible trouble.
The central bank already knows that our national debt is never going to be paid off never ever so do ffg.when the next crash comes we will be selling the island of ireland to a billionaire and thats the bottom line….!!
@Robert Phelan: hasn’t it been sold to a billionaire already?
@Robert Phelan: the system needs national debt to function, but I get your sentiment that our national debt is ridiculously high and serious measures should be taken to bring it down when we can.
@Robert Phelan: I heard Trump’s looking for an island to buy.
@Thunder Snowman: my thoughts exactly Thunder..
@Revolution or Cup of Tea?: We could use national Savings to Function, and Never have a Financial Crisis Ever again.
@Al Madzer: who dennis who can’t be named
Central bank advises government to be prudent and pay down the debt incurred by the banking industry! Its a great country for the rich.
Journal deleting a perfectly reasonable comment yet again (not mine) roll eyes
The banks created this economic mess facilitated by the F.F. government of the day and their gangsterism was endorsed by the F.G./ so called Labour coalition. Perhaps the banks who presently exempt from paying NO TAX on their profits for the next 20years should be brought to heel and contribute to repaying for the mess they landed this country in.
@Donal Desmond: Don’t be posting that truthful stuff on here!
How we never hear we one most in debt country’s in world .with German on downwards path if trump traffis German cars pop goes E.U.as globalism implodes
@den o sullivan: You’re a bag of informed sunshine eh.
@Bilbo Baggins: Esperanto I believe – the short lived Euro language experiment. Den is the last remaining speaker …
Why don’t we save by abolishing the Central Bank?
We have a European Central Bank for monetary policy…
@Revolution or Cup of Tea?:
They don’t pay as well
I really hate articles like this. We need some positive news at times.
@Madra: That’s not Donald is it? we will fabricate something for you later…
@Madra: How’s this for positive news. Investment companies are stockpiling cash. With one company storing a reported 122bilion in cash money. The last time they apparently did that was 08 just before crash. Now central bank is telling goverment to save. Where am i going with this rant you ask? There is a crash coming again soon. And holoween will prob be when it comes.
@Nafets Erupe: theres nothing new about storing cash in times of volatility. Equities are trading at a relatively high cost at the moment and there is no return on bonds. Most investment houses have taken profits from recent rallies and are waiting for opportunities to invest.
We are 10 years into a bull market, of course the markets are going to contract – that’s a given and it happens on average every 7-8 years. The yield curve in the US inverted last week which is something that has always preceded a recession – noting new here either.
What is new is your Halloween prediction – usual time from yield curve inversion to recession is 18-22 months so why do you say Halloween?
@Dara O’Brien: That ‘lil old thing called Brexit maybe?
@Shakka1244: do you honestly think that a) Brexit is any more than a minor blip in the world economy
b) a hard Brexit hasn’t already been priced into the markets?
@Nafets Erupe: taxi drivers and shoe shine boys predicting a recession.
If the debt is 42k we just get more people in to reduce it down to 42 quid each, simple. Then have a whip around and cover the remainder that way!
The Government will do exactly what their big business bosses tell them. Always have, always will.
Ah well, lets look on the positive side. We will have a nice hospital for kids, and internet access for all the bogs, with this dreadful shower of muppets we elected. Next election it will be the other dreadful shower of crooks and muppets. (Martin and his crowd have given fg the rope to hang themselves. That’s the deal.)
Great.
@Anon.me: As deputy leader of the blueshirts Michael Martin will eventually pull the plug. Leo will then become the deputy leader of F.F. The circus continues…. With the blessing of the banks.
If have it I’ll spend it….
Yeah mean the downturn that is just around the corner
But FG have an election to buy. Spending overruns on every major project, while we are spending 14million a day on interest alone on our bailout, a great bunch of lads.
We need tax cuts now – bring up the 40% to €50k now – we just don’t have enough at the end of the month. The future can wait
have your say