Budget 2010: Stabilising the Public Finances?

Ok, so as with some previous big events such as the Snip Report, it may be best to partition the discussion of the budget into a set of separate threads. I’ll put up a few topics, offering a few of my opinions as I go along.

Let’s start with a big question. Irrespective of one’s opinion of how the adjustments have been achieved, has this set of budgetary measures stopped the rot in the public finances? Will it succeed in stabilising the public finances? My guess is that it will and that, if passed by the Dail (I’m assuming it will) this set of measures will prove to be a key step on the road to fiscal stability. In particular, I would guess that participants in international financial markets will be impressed by the package and that this will help a lot in distinguishing Ireland from Greece, which could prove to be an important issue in the coming months.

The other attitude to this package is what, I suppose, one could term the ICTU approach. This would emphasise that the cuts are likely to further depress the economy and keep us in a downward recessionary spiral. On this point, it’s worth noting that the budget figures concede that the €4 billion in cuts will have a negative effect on tax revenue: Table 8 of the Stability Program Update concedes that the budget day expenditure adjustments of €3.8 billion will reduce tax revenues by €897 million, so the net reduction in the deficit relative to the baseline laid out in the White Paper on Saturday is around €3 billion.

Budget 2010

The budget materials are now available here.

Sorry Sorry Brian

With the bad news about to be unleashed, it’s a good day for gallows humour, so check out Ronan Lyons’s musical tribute to our embattled finance minister (music here). Almost brought me to tears so it did.

Who Blinks First? Ireland, Greece, the ECB, and the Bank Guarantee

The rules of the game have changed for Ireland.  Should Ireland respond to this new risky-game environment by selling off some or all of its domestic banks to large foreign bank holding companies?  I believe that it should.  We can keep the names on the high street bank offices, but lose the liability guarantee.

Dismal outturn in 2009 for Irish agriculture

While attention today is understandably fixed on tomorrow’s budget, it is important not to forget what is happening in the real economy. The advance estimate of the value of farm output and income in 2009 published yesterday by the CSO underscores the severe impact which the drop in milk prices has had on farm output and incomes in the current year, although a dramatic drop in the volume of cereals produced as well as a continuing decline in sheep production also contributed to the dismal result.

Overall, the value of agricultural output at market prices fell by 18.9%. This includes a fall in the value of milk production of 34.8% and in cereals production of 52.1%, while the value of cattle production fell by 10.7% and pig output by 12.6%.