LAST UPDATE | 24 Jun 2022
Lauren Boland reports from the European Council in Brussels
ADDITIONAL MEASURES TO tackle the cost of living are unlikely to materialise before Budget 2o23, the Taoiseach has reaffirmed.
The new budget in October will be the focus of the government’s efforts to try to mitigate cost of living increases, Micheál Martin said today, though Tánaiste Leo Varadkar said earlier this month that he was “not ruling out” further action between now and then.
Eurozone countries met today at the EU Council to discuss their current economic situation as rising inflation put leaders on alert to the possibility of recession.
The Taoiseach said that globally, recession is a risk but “not a given”.
He was joined in Brussels by Minister of State for EU Affairs Thomas Byrne and Minister for Finance Paschal Donohoe, who currently holds the presidency of the Eurogroup.
Donohoe made a presentation to leaders from across the EU about developments in the European economy.
At the meeting, members discussed how Russia’s war on Ukraine is pushing up food and energy prices, as well as creating economic uncertainty.
They said those factors are dampening growth and exacerbating inflationary pressures globally.
Speaking to reporters after the meeting, the Taoiseach said: “As far as I’m concerned – and it’s not just me, we’ve had discussions in terms of the three party leaders and the Minister for Finance and Minister for Public Expenditure – there’s no question but that a Budget is the optimal way to deal with this crisis.”
People are under a lot of pressure now. We have already taken measures, but it seems clear to me now following the consultations I’ve had across Europe that there will be a lot of pressure on us again in the autumn and winter period and we’ve got to prepare a comprehensive package to deal with that.
“We’ll use the budget in terms of further measures to alleviate pressures on people but also position the economy for the next 12 months to focus on areas of expenditure that will deal with the pressures that are on people, but that also give us a sustainable pathway forward on issues like childcare, climate and so on.”
He said the cost of energy in particular will be “significantly problematic moving into the autumn”.
Ahead of the meeting, Minister Donohoe said that eurozone countries must avoid the massive inflation seen in recent months becoming a normalised feature of their economies.
He said he would tell the EU Council members that while there are “new and growing” risks in economic performance, the expectation is still that the economy will grow.
However, Donohoe stressed that “we do need to acknowledge the risk that we could face if inflation does become embedded into our economies”.
“It is in all of our interests that [with] the inflationary pressures that we’re now facing, measures are put in place to do two things.
“Firstly, to avoid the risk that these pressures become part of our medium-term outlook and become embedded in our economies, but secondly, as actions are being taken to prevent that development, that governments also put in place appropriate measures to support those who were hit the most by the rising cost of living.”
He said that “for many at the moment, the cost of living and how quickly it has increased is now leading to a very rapid fall in living standards” and that the eurozone must avoid budgetary measures that put further pressure on costs.
Consumer prices in Ireland were 8.2% higher last month than the same time last year, according to Eurostat – slightly higher than the EU average of 8.1%.
A new report from the Economic and Social Research Institute has forecast that the Irish economy should grow significantly despite external pressures, with an average inflation of 7.1% expected for 2022.
Earlier today, the Taoiseach said that Ireland’s indigenous and foreign direct investment is strong but any weakening of global markets could affect our exports in 2023, though there is “no immediate sign of that yet”.
“If you watch the last number of weeks, companies are continuing to invest in Ireland. The census figures reveal that people are coming to work in ever greater numbers over the number of years even through the pandemic, which all reflects a growing economy,” the Taoiseach said.
“But we have to try and get the balance right. We don’t want to end up in a stagflation situation. That’s something we want to try to avoid.”
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