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The European Commission’s Assessment

You can read the assessment of Ireland’s Stability and Convergence Programme here.  It is also useful to look at the assessments of the other EU countries, in order put the Irish position into a comparative context.

2 replies on “The European Commission’s Assessment”

It might be time to say something good about the economy soon. There is lots to be gloomy about but the positive thing is that there is now beginning to be some capacity in our economy to actually provide internationally tradable goods and services again, after the capacity having been absorbed for so long by internally focused economic activity.

I wish I could see the positive side of the Commission’s report. The full text is here:
http://ec.europa.eu/economy_finance/publications/publication14042_en.pdf

In essence, it says that we have blown through the Stability Pact deficit limit and our plans to restore balance in our public finances depend on wishful thinking.

The Commission is more pessimistic about GDP and the deficit than the Department of Finance.

The Commission thinks real GDP growth in Ireland was strongly negative in the year 2008 (-2.0% compared to the Department of Finance forecast of -1.4%) and will contract a further 5% this year.

The Commission’s interim forecast projects that “taking into account the measures for the current year in the budget for 2009, the deficit would widen to 11% of GDP in 2009 and worsen further to 13% of GDP in 2010 on a no-policy change basis.” That’s 13% compared to 9% projected by the Department of Finance (assuming those €16Bn. of savings can be found!)

The Commission points to the weaknesses in the “Addendum” document’s projections: “the addendum includes for the years 2009-2013 a sizeable “cumulative fiscal consolidation objective” which is neither allocated to the revenue or expenditure side (let alone to subcomponents) nor supported by measures. Furthermore, Ireland has generally recorded slight expenditure overruns compared to plans. While this used to be masked by higher-than-expected revenue and GDP growth, it has contributed to the worsening budgetary position in recent years.”

Overall, this is a sober estimate of the challenges facing our public finances. Much will depend on the ability of the political system to bring about reform but the Commission is too diplomatic to spell this out.

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