Government Statement: €15 billion target

The government statement reads:

The Government has today decided that an overall adjustment of €15 billion over the next four years is warranted in order to achieve the target deficit of 3% of GDP by 2014. The key reasons for the significant increase from the figure announced in Budget 2010 are lower growth prospects both at home and abroad and higher debt interest costs.

The purpose of the Four Year Plan for Budgets and Economic Growth is to chart a credible way forward for this country. The size of the adjustment for 2011 and the distribution over the remaining years will be announced in the Four Year Plan. The Plan will contain targets for growth and strategies for the achievement of those targets.

The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures. To do so would further undermine confidence in our ability to meet our obligations and responsibilities and delay a return to sustainable growth and full employment in our economy.

Our obligations are clear. We must demonstrate that we are bringing sustainability to our public finances. We must stabilise our debt to GDP ratio over the period of the Plan. And we must set out our strategy for returning our economy to growth.

59 replies on “Government Statement: €15 billion target”

steve mcqueen in the magnificent seven:guy falls off a he passes each floor he shouts ‘so far so good’

It appears that, as commented on by those cynical and negative layabouts on internet fora, on whom, I might add, we can lay much of the blame for our current lack of confidence, were entirely right in their assertions that “delay and pray”, with a shot of “deny” and a chaser of “Iceland!Iceland!Iceland!” have been government policy from mid-2007. Thanks to their lack of hope and refusal to wear the green jersey, they’ve brought is to having to belated face up to reality. It looks very uncomfortable from the inside of a Merc. despite the tinted windows.

‘lower growth prospects abroad’

Sorry, thats not just inaccurate or just misleading or just disingenuous: its a simple lie. When they put the budget together this time last year, the IMF was forecasting global GDP growth of 1 1/4 % in 2010. The same IMF now thinks 2010 will see 4.8% growth in 2010 and a not too dissimilar number next year. In other words, growth abroad has significantly surprised on the upside and can be described, accurately, as booming. And expected, by the IMf, to continue to do so. Just look at the continuous upside surprise to UK growth, for example.

What is worse, knowing that you don’t know what you are doing or just not knowing?

The purpose of the Four Year Plan for Budgets and Economic Growth is to chart a credible way forward for this country

So its not about the 3% anymore. that 3% target is indeed in the statement but not in the 2 elements that cover the purpose or obligations.

What odds higher interest rates in 2011/12? I don’t mean for Ireland inc but rate rises by the Fed, ECB and BOE.

That really will make it very difficult indeed.

If I was this bad at forecasting in my job I would resign (before I was fired)


If the IMF is right and global growth is accelerating, the the DOF has got it wrong again. That being the case, as the most open economy in the world, Irish growth should be stonger than your forecast next year. God, I think, I am turning into JTO now. After 16 iterations, has the DOF and the other Irish forecasting mafia finally under cooked their GDP number?

Absolute media master stroke to send out McDowell on a Tribunal solo run to distract everyone from the budget. If only that energy could be applied to the actual fiscal situation!

I don’t have a forecast for next year. I do point out that growth, globally, has surprised on the upside to a considerable extent over the past 12-18 months. So the DoF, who presmably (?) know this, are being deliberately misleading.

There will be plenty of room for optimism as long as the govt doesn’t try to maintain bubble spending and bubble payment levels and to crush the returns on hard work and education in the private sector.

A cost efficient state sector is a priority. That implies lower cost, and much higher effectiveness. Both should be possible.

@ simpleton

Emerging ecoonomy growth will be of very slight help to Ireland.

We export more to Switzeralnd and Hungary combined than we do to China/India.

US growth in H1 2011 will be close to 2%; UK and Eurozone growth will also be subpar.

The end of emergency stimulus measures will also be a factor.

It is possible that there will be no ‘new normal’.

@ tull mcadoo

Singapore’s trade/GDP ratio is over 450% and we could learn a few things from them.


@ All

There was about €60bn invested in commercial property across the world during the boom years.

It is very likely that there is some billions in property overseas protected by various shelters that could help in the rainy days head.

15 bn required.
3 budgets to do it.
6 bn being talked about for 2011…

Eh, that means 5 bn in 2012 and 4 bn in 2013?

Surely some front-loaded mistake?


I would not allow rthe DOF forecaster to fill out the Scoop 6 on Channel 4 Racing of a Saturday. It could not pick the winner in a Walk Over.


Here is hoping. Although Ernie will no doubt be along to defend the salaries of the rich and famous in the PS.

This is getting tiresome.
How much do you have to do to be kicked out of office in this country?!
Austerity wouldn’t be necessary if so much waste hadn’t been let happen in the first place.
I hate people who seem to revel in it like it’s some kind of collective challenge. It’s not you whose facing the dole queue or the boat or going to grow old without your kids around.
Advocating austerity now having failed to warn about the boom is contemptible
About as useful as a bugler on the Somme! As Lennys troops go over the top again

@Michael H
Neither you nor I know what 2011 will bring. 2010 has brought faster than expected growth in the Uk and Eurozone, in-line with expected growth in the US and much faster growth in emerging countries. I am simply pointing out that it is quite wrong to blame lower-than-expected current Irish GDP on disappointing global growth. That might be what happens next, but it ain’t happened yet. They have to find something else to explain lower irish growth.
Academic fashion, as always, is to argue by identity, hence the current fad to blame a lower GDP deflator. The fiscal fetishists draw no connection between previous fiscal austerity and disappointing economic outcomes, let alone what is about to happen as a result of the next bout of masochism.


So I take it you are not a proponent of fiscal austerity. If you take your last sentence at face value, we should open the taps and spend our way to prosperity. Perhaps expaning public sector emplyment would be a good idea.

Ah, there you go again. What i am against is fiscal-austerity-by-numbers. I think there has been a great forgetting, where so few people do economics any more. You and all the other argue-by-identity merchants think that taking 7.5bn out in year 1 is a matter of arithmetic; something to be done in the morning so we can take the rest of the day off.
Old fashioned types, who like to think about behaviour, consequences, and how everything relates to everything else in the real world (think of us as old fashioned literary political economists who have run more Bayesian and structural VARS than you have partially differentiated simple linear models) simply point out that what you are about to attempt won’t work, can’t work and will end up in rather a big mess.
And that’s the line I have always taken, as you well know.

“Delay a return to sustainable growth”. When is the last year that growth in Ireland was sustainable ?

The numbers should be linked to what people can understand. E15bn is roughly 30% of government spending. Or E7,500 per family. Take 1 leg off every chair in the country in the bid for balance.


I don’t see how you can achieve the cherished goal of downsizing the Public Service to pre bubble levels and of restoring sanity to the tax system without tightening fiscal policy.

Well now. Isn’t this a nice little experiment!
In the 30’s they tried austerity first – it didn’t work. Then they went for stimulus and that did work.
In 2008 one country went for austerity while everyone else held off – and guess what – all surprised on the upside apart from one.
QED – austerity compounds crises!!!
The time for driving for efficiencies is during a boom.
Using historical and contemporary controls proponents of austerity are wrong!

Thanks for that. Is the base the 70bn gross or the 55bn net?

Anyway the moral of the story is that unregulated property booms are lethal. We can only speculate (!) as to what effect 15bn of cuts will have on the mortgage repayments of the sizeable proportion of the population that are locked into 40 year mortgages up to 150 km from Dublin in houses that are ‘worth” far less than purchase price.

It would have been far easier to compulsorily purchase the land banks of the 6 developers who controlled most of the land around Dublin back in 1998. There would have been no expulsion of young families to Mullingar and Killeshandra . And none of this mess.

“IMF … …. is FORECASTED to grow … …”

Lets just sit tight, suck this and see what the real outcome will be. IMF is the political a cheerleader for whom? Yes, I thought so!

Global (aggregate or is that average?) economic growth is ‘growing’? Maybe I guess, but very unevenly. Western liberal democracies are (mostly) tuckered out on debt, so surpluses to rein in their debts must come from export earnings. So who are the suckers that will be doing all this buying then?

Lets assume our aggegrate economic output has Regressed to, and stalled at 2002 levels – or whatever. That’s 6 years down the drain! We are going to have to do some almighty good ‘growing’ to pullback to 2008 levels, not to mention the extra needed to go beyond and catch up.

The US is staggering around like a drunken sailor, the UK is virtually an economic basket-case. So whose Kathleen’s White Knight then?

That , “… our strategy …”, bit in the last sentence of statement better be more substantial than, “we must grow our knowledge economy”.

If the US dollar continues to be devalued – oil will … …? Yep! and our economy will ungrow! As I said at the outset. Sit tight.

Brian P

While the government keeps talking about the voted expenditure that they have to cut, the reality is that they can cut anywhere they like in the 71.5 bn that they spent last year. And indeed, they can raise taxes anywhere they like too!

The 71.5 bn also includes some weirdness. HSE spending, for example, is a figure net of the Health Levy which must be 1-2bn? And prescription charges, rates?, council income raising measures (development levies? parking charges?). Do we really have a full view of what income the government has and what it is really spending?

I agree with the rest of what you say.

“QED – austerity compounds crises!!!”
You might as well say that you have to have a period of austerity before stimulus will work if you look at the 1930s. You might also say that if you have a financial crisis, due to a property bubble, you have to have a debt deflation before anything else will work well.

But these are as unsupported as other assertions.

A country that has been completly dependent on foregin capital since the 60s and who gave up all pretence towards domestic capital creation after the Tallaght strategy other the filling the coffers of CRH will now go cold turkey.

Lets hope for a significant deterioration in USA- China relations so that we can get some scraps from the table of the American multi-national sector as all skills in the older tradional fishing, peat extraction,Beet, state utility sector has been run down due to the flow of EU state aid and Euro strength.
I do not think this type of a experiment has been tried before – a Irish serf class having run up debts in a currency that wishes to compete with Gold as the worlds top currency now are going to pay these units back with less euro tokens available in the supply
If the ECB succeeds here we will see one of the biggest transfers of wealth in the history of economics.
A truly awesome display of catholic servitude from our political class.

Lets hope this experiment works out for the best

A country that has been completly dependent on foregin capital since the 60s and who gave up all pretence towards domestic capital creation after the Tallaght strategy other the filling the coffers of CRH will now go cold turkey.

Lets hope for a significant deterioration in USA- China relations so that we can get some scraps from the table of the American multi-national sector as all skills in the older tradional fishing, peat extraction,Beet, state utility sector has been run down due to the flow of EU state aid and Euro strength.
I do not think this type of a experiment has been tried before – a Irish serf class having run up debts in a currency that wishes to compete with Gold as the worlds top currency now are going to pay these units back with less euro tokens available in the supply
If the ECB succeeds here we will see one of the biggest transfers of wealth in the history of economics.
A truly awesome display of catholic servitude from our political class.

Lets hope this experiment works out for the best

1930’s => austerity + stimulus = sustained growth
2008 => stimiulus = sustained growth; austerity = further contraction
So in the quasi mathematical world of economics the factor common to sustained growth is stimulus. Austerity does not seem to be a pre-requisite.
Stimulus is an odd thing whereby the magnitude of the mistake is diminished by flushing out the lost value of that mistake. You don’t undo the mistake but you change the environment in which it occurred so that it doesn’t matter so much.
Almost like a hole in a bucket. Austerity tells you to stop pouring water into it and try to mend it. Stimulus tells you to just keep pouring more water into it. Problem with austerity is that while you’re mending the bucket there’s no water to drink. Problem with stimulus is that it’s messy but nobody goes thirsty. Apologies for the clumsy analogy

Austerity does not work in this monetory system – the debts built up over generations get compounded to infinity.
Stimulus is by nature temporary.
Once upon a time there was a concept of investment in Capitalism – but it has been corrupted by Anglo Buccaneers who seek bounty and Continental Priests who require tribute from the masses.
We are truly caught in a vice between these characters and are led by redneck leaders who have little concept of power dynamics and basic maths.
This will create a Malthusian nightmare of biblical proportions


back to your original point re ‘lower growth prospects abroad’. you may be on to something. The original adjustment was 8bn way back when. This has mushroomed to 15bn due to the above. However, the pro-notes for the Bail-out cost 1.5bn per annum x 4 or 6 by my math. That leaves 1bn for aforementioned “lower growth”.

So is the bulk of the marginal adjustment is due to the letting Sean & fingers run riot post 2002.?

@ Kevin/Eureka/Simpleton

didnt we have a somewhat successful period of austerity in the late 1980’s, followed by that whole Celtic Tiger thing? Isn’t the whole point that you need a bout of austerity every so often to wipe the inefficiencies from the system, while at the same time accepting that you need some smartly targeted government stimulus to keep the economy moving when private investors get scared or disinterested? Our problem is like the two boozers, Joe Public and Joe Private, who usually take turns driving the car home from the pub when the other is too inebriated, except now both of them have been going nuts at the happy hour and the barman has taken our car keys til we both sober up.


raising the top rate of tax above 50% and preserving the FF/TU stuffed quangos is not wiping the inefficiency out. It is making it worse.
A better analogy to your would be that Brian and the boys spiked our drinks, broke into our house, stole everything of value and sold our gear and our car.

Keep trying. I hear the party is looking for good candidates.

You make the case for Schumpeterian ‘creative destruction’. But that is not what we are doing. We are preserving the public sector at the expense of the private. Tull puts it better than I.
Your metaphor doesn’t quite work. Although the journey can be a bit all over the place, even drunks get home eventually. We don’t stand a chance.

One of the main differences between the ’30’s in the states and here now is that the banks were let go to the wall by the thousands and took peoples savings (and debts) with them. Massive levels of bankruptcy removed debt-ridden companies and individulas. They and a debt free economic “clean slate” to stimulate.
Where can we put our money that will stimulate growth? It usually goes into construction. The government was already 25% behind its projected public capital expenditure in June of this year. Putting all our eggs back into the construction basket may, and I stress “may” help in the short term but it is not the long term solution. Sustainable construction output is 10-12% of GDP and we are still loitering around that now despite the collape of the sector. 10-12% of GDP cannot sustain the vast number of construction trained employees in this country. We need some other industry for those unemployed and this should be the focus of any government stimulus. Getting as many back to work is the only way to close the deficit gap and keep it closed.
But unfortunately by the time a new Government has finished patting themselves on the back for getting into power and commissioned countless reports on what to do next, the oppotrtunity will be past.

@ Simpelton.

Rant? Not in my nature. If I seem vexed – I am, very. I have been ‘here’ before a couple of times and it was most unpleasant. Luckily, I had secure employment and survived, but it took me many years to rebuild even a part of my savings that I had to run-down.

This time there are such massive debts that only exceptional ‘growth’ will extract us. A level of growth which is physically not possible. And, we have a very nasty, looming problem: stalled production of crude oil. We did not have this predicament in ’70s and ’80s. And the other English speaking economies were in relatively better shape.

The IMF is a US institution. So, the history books say. It may appear to be otherwise. Nothing wrong with the US you understand – except you might worry about their drastic deficit situation and what would happen to global financial system is the US is ‘forced’ by domestic pressures to continue their stealth devaluation. So, a little ‘rant’ by IMF gives a some solace to … … whomever.

We can rant all we want to about our domestic situation. Its truely terrible. But draining blood from a patient who is already in trauma is not a good career move. I know, and so do you, what the likely outcome of that will be. Not good, Simpelton, not good.

Brian P

@ Simpleton/Tull

there was an argument a few posts above that austerity will simply either never work or never be required. Fintan O’Toole basically says the same thing today in the IT. I’m merely suggesting that austerity has a purpose in the solution as well, albeit that we may not be doing it very intelligently here in many situations.

I’m going to say this just to annoy Tull, who pretends to be a blueshirt but really is very sound on the National question.
The only country getting it ‘right’ in my view, is the UK. There, they have done QE sufficient to generate a nice little inflation rate of 3%. Does wonders for your real debt levels. And they have devalued the exchange rate.

They have also talked a very good game about fiscal austerity and have laid out 5 year plans in that regard. So far, the austerity is all talk, by the way, and is already being buttressed by clever public/mostly private plans for large infrastructure investment. They have done a deal whereby the medium term fiscal stabilisation that they will implement, if it does too much real economic damage, the bank Of England is standing by with the helcopter, ready to drop in more cash to keep things ticking over. All very sensible, all very credible. And under massive assault from the academic economists.

Funny thing is, it is already working and producing very large upside surprises to growth. Credible policy making is a very funny thing. The private sector understands and applauds (via spending) while theorists say it can’t work.

Our policy mix ain’t credible. Not even close.

So, yes, austerity can be very appropriate. The US could do with a touch of medium term fiscal planning as well.

Is there any macroeconomist out there who thinks this is going to work?

Didn’t think so.

Careful, Simples, or you’ll have JtO on your case like a rash. But you have a point. The ability to apply a bit of QE and to let the currency slide is a bonus for the Brits. And HMG has been helped by a shift in the public perception that in the pre-bust Labour years the state got too big, is too controlling, too intrusive, too clumsy, too centralised and is prone to tolerate gouging by privilged insiders.

Ireland is at nothing while the price level for private household consumption remains close to 20% above the average EZ level – and the kind of fiscal adjustments the MOF might be considering will do very little to close this gap.

@Bond Eoin Bond and @ Tull
What happened to my buckets? They have been stolen by Brian and god can onlly guess what the two drunks would have done with them.
Austerity should underpin our economy at all times. There should never be waste in an economy. Every penny should be accounted for. Austerity really works in avoiding crises like this.
Austerity can prevent these crises but it cannot cure them.
To go back to my brilliant bucket analogy!!!! – austerity is always inspecting the bucket for the first sign of a leak and fixing it immediately. And that’s all ze good. It’s too late for austerity now.
Gotta look at other options.


You have a point. NAMA I & II were supposed to provide a bit of QE lite to the economy in terms of cheap liquidity. The euro was falling in the Spring until Axel Weber decided that tightening monetary policy when EZ M3 was falling like a stone was a good idea.
The UK now has a proper govt with a credible fiscal policy and Mervyn in his helicopter. I would not take it too far. Today’s idea by Merv to jack up capital ratios in the banks and break them up is a stroke of idiocy and just goes to prove that he guy is an low flyer bourn aloft by a gust of wind (Sir Humphrey)

If you really knew your Irish history you would know that one of only two thing the Blueshirts were sound on was the national question.

The British are not in the Euro. Whatever mistakes they make they can fix.
We are in the Euro. We are stuffed. We have only one option – austerity which is NOT working.
And the only thing worse than the quality of this government is the quality of the main opposition party. They go mad on the whiff of fascism god love their poor self important souls.

Ah Eureka you must long for thday when Eamon becomes Taoiseach so he can implement his caring/sharing policies. Will Labour be bring the printing press into govt buildings. Has Gilmore figured out which version of the Stickies he joined yet.

Where do you see stimulus working?
I see plenty of places it doesn’t work – Japan, the US (QE effects in competitive devaluation), the UK (QE effects in competitive devaluation), Germany? Well, kurzarbeit is precisely the sort of saving in the good times mechanism that Mr. Keynes would have approved of, but I think you’ve argued before that automatic stabilisers are not stimulus?

I’ve heard reports that the new plan is based on average growth of 2.8% over the next four years.

Does anyone have a link to a report confirming this? If this is indeed the case, why wasn’t this included in the statement.

Rather than global growth being the problem isn’t it far more likely that the government has been advised/told that nominal growth of 5.6%, 6.7% and 6.5% in GDP over the next 3 years was and is completely unrealistic.

I think as always it is easier for the government to blame “international” factors rather than looking at the reality at home.

Sometimes it feels more like we’re marrooned one of the agar plates that we used to have in biology. Little islands of murky awfulness growing from every political corner.
On a personal level I’m in my mid thirties, have 2 kids 7 and 4 and am absolutely agonizing at the prospect of having to emigrate to Canada and wondering how they’ll manage having to leave all their friends and good life behind. Also hate the thoughts of having to leave my parents behind and not being around when they grow older and need a bit of help.
Know that life could be ok there but have always loved my country and what it stood for.
Hate that we fought each other rather than for each other. Hate that we could not reframe this in a European context and play that card properly. Hate that we are too bloody nice to the outsider and too harsh to our own. We are a community of 4 million. Our values are simple – we value education and health and do not spend on defence. We have right and left politics but the right hides in church, IBEC and FG. The left doesn’t even know it’s left.
All in all. I firmly believe that we can make a go of this. But it is time to identify the enemy as being outside ourselves. It is time to unite and fight! Our last victory was in 1014! One very thousand years shouldn’t be too much to ask

Go to Canada for goodness sake – there is no community/sense of values/effective politics in this failed society – and we most certainly do not stand for anything more than selfishness,great regard for ‘cute hoors’in all aspects of life and ,of course,keeping the various gravy trains of the elite going at the expense of the great unwashed.
External change events/agents required urgently!


Try to hang on til next week. Spartacus O’Serf is on the march to Dublin, with willing allies from viking, arab, english, african, american, and others – the english are signing up to the serf brigades in droves – as one of their senior commanders put it to me – ‘life is so awfully boring without the Irish’ – plan is to take over at around five o’clock on friday, make a short statement on the 6 o’clock newz, and convene the posse of tribal elders in the mansion house for the following sunday afternoon.
Then we’ll sort it all out next monday!

Off you go! Ireland is where the Irish are. No one can defeat a survivor! Really the nationalism is a little restrictive? You are also christian? Catholic, perhaps? Human?

Divisions are one method used to make governance easier. Those hwo govern always combine with others of the same kind in a conspiracy against those whom they serve. The agency problem in a nutshell?

Growth worldwide will falter, but more so in the Irish markets than BRICs. Including Canada and Australia who only live to serve development.

For those who wail against austerity: recall how many years the Celtic Tiger prospered. Rule of thumb? Same number for curing the disease, given the political cowardice and ties to the EZ. All voluntary and all applauded by the establishment. Income inequality is always reversed after a period of bubble. This can be of two kinds: socialistic or revolutionary. More wealth is retained under the first? Cowards threaten and scream.

Go to Canada! Look carefully at their mistakes. Proximity to the USA is the main cause. A cousin of mine ended up in Edmoton. He now has a wing of his hospital named after him. Bloody public servants!


“Our last victory was in 1014! One very thousand years shouldn’t be too much to ask”

I bought a Gill and Macmillan book called “the atlas of irish history” recently. The Normans came in 1169 but were absorbed into society by the 1300s and there was an economic boom in that century the likes of which the country has never since since. Lots of new towns were built and there was no looking back. It was only in the 1500s that the Sasanachs started pushing their weight around. There were some notable battles won by O Neill and O Donnell and even in the 1640s.

Afterwards the usual problem was turncoats who put their own interests ahead of those of the people. Their descendants got into the building and banking industries.

“None of them doing as badly as us!”
None of them had a bubble quite like ours. None of them does crony in quite the way we do. None of them have made quite so many mistakes so far.

@Karl Whelan
Lenihan gave a briefing to political journalists last night at which he confirmed the cuts figures are predicated on an annualised growth rate of 2.75 per cent.
Seems optimistic to me..

I’m glad they’re at least finally admitting that spending cuts are more appropriate than taxation. Increasing taxation, especially corporate tax will kill off an already embarrassed-looking and decrepit little Celtic tiger.

For me there needs to be some measure of privatization. There is just too much bloat. The government needs to start selling property off cheap from NAMA immediately – the bottom needs to be grabbed here and not waited for when the economy is totally bankrupt. It’s not a time for pride, it’s a time to actually confront turning the real honest corner, not the pixie-fairy one.
Government spending in Ireland is outrageously high, and I’ve no doubt there’s plenty of room to cut there.

Unless the unions are 100% sure that they did everything they did to stop the government from inflating the economy, they need to back off. I’m ~100% sure, they followed their own vested interests to fatten themselves and sell out to the highest bidder. They have to be prepared to make concessions.

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