The Medium-Term Fiscal Strategy

On the budget documents is The Economic and Fiscal Outlook. This goes beyond the details of the 2012 Budget and provides guidance on the government’s medium-term plans and projections out to 2015.

Some of the noteworthy details in this publication include

  • pages D16-D17 show how the government intends to meet its revenue targets without raising income tax rates or touching income tax bands or personal credits (and also no more increase in the top VAT rate).  What is required is a big increase in local charges (property tax etc) and other measures to broaden the tax base (cutting back on various income tax reliefs, reduction in tax related costs of private pension provision, broadening of PRSI base).
  • Table 11 on page D19 shows the evolution of various expenditure and revenue categories over 2010-2015
  1. total revenue very flat as a ratio to GDP (34.6 percent of GDP in 2010 and 2015)
  2. government consumption down from 17.0 percent of GDP in 2010 to 13.7 percent of GDP in 2015
  3. public investment (row 21) down from 3.7 percent of GDP in 2010 to 1.4 percent of GDP in 2015
  4. social transfers (row 18) down from 18 percent of GDP in 2010 to 13.6 percent of GDP in 2015
  5. interest payments up from 3.1 percent of GDP in 2010 to 5.7 percent of GDP in 2015
  • Table 14 on page D23 shows the decomposition between cyclical and structural components. Here, the government is using the official EU estimate of Ireland’s level of potential output and, as in previous publications, is quite critical of this measure, especially since it implies that Ireland will be operating above potential in 2014 and 2015.  It would be desirable for the government to also report its own preferred measure of potential output, since the split between structural and cyclical imbalances is so critical in interpreting the fiscal position. Going further, it would be desirable for the government to indicate the role of ‘special factors’ in determining the underlying structural fiscal balance. Just as the property boom, relatively high inflation and the large current account deficit led to a revenue windfall during the boom,  the usual relation between the fiscal balance and GDP is distorted during this adjustment phase due to deleveraging, the under-shooting of construction adjustment, real exchange rate depreciation and external rebalancing.
  • Page D15 outlines risks to the outlook.  Under the Troika MoU, the fiscal targets are minimum thresholds. It would be interesting to know the contingency plans in the event that an undershooting of GDP requires further spending cuts or tax increases. (That said, it is possible that the existing spending and revenue targets have implicit built-in contingency allowances on a prudential basis.)

43 replies on “The Medium-Term Fiscal Strategy”

@… the government intends to meet its revenue targets without raising income tax rates or touching income tax bands or personal credits …


I fail to see how the government seriously addresses the amount of unearned incomes, but I do see how they abolish election promises on rent extraction schemes.

The financial specialists are still using harvard educated teflon-perosnalities and overpaid consultants to present their junk economics as the only viable solution, to impose depression on purpose to dismantle democratic structures and governments with technocratic financial planers.

The political resistance against this coup in the Irish political class is close to zero.

Line 21.

“public investment (row 21) down from 3.7 percent of GDP in 2010 to 1.4 percent of GDP in 2015”

But what is the the level of depreciation of the public asset stock? Not shown. But maybe as much as this or more.

If so, things will literally start to fall apart. This isn’t a saving, but deferring a growing liability.

There are three scenarios: G*P increases; flat-lines; declines.

If those who have been volunteered in their political absence, to pay tax revenues to the state have flat-line or decreased incomes, going forward, as they say – then what?

What if folk decide to pay down debts ASAP? How will this impact VAT, etc?

What if … … No, let me correct that. What when energy prices continue in permanent uptrend mode. What’s the outcome here?

The Guv alleges that they need extra hands on deck and are threatning to hire – like, ‘experts’, whatever they are. Must be a lot of those critters floating around on pensions and with Free (or should that be Pre-paid) Travel Passes, who might just like to volunteer and work without remuneration. Being ‘at home’ all day is not exactly a ball of laughs.

Of course there is always the Soylent Green solution! Plagerized Olli Goldmith they did!


It would be interesting to know the contingency plans in the event that an undershooting of GDP requires further spending cuts or tax increases.

Agree with that obs.

This is economy patient etherised upon a table on drip drip hoping not to disturb the universe stuff.

It won’t get the patient off the table but may see the pulse flat line if GDP founders.

It will be interesting to see at some point in the future what GDP actuals are in 2012 and beyond versus what we thought they might be (as he walks into the future, looking backwards).

Just looking at some UK stats this morning I couldn’t help but notice the following comment: “Orders fell to the weakest level in two years as demand from abroad is plunging”

I presume our gov. thinks we don’t face the same problems as the UK when it comes to our glorious export businesses.

A fairly sure sign of spin in a document like this is if it compares Irish government deficits to GDP, which flatters them, without also comparing them to GNP, which does not.

We’re looking at Spin City here.

You have to give it to the Greens – their car tax policey was very enlightened and was achieving its objectives
But zee Germans don’t make much money from the sale of their Volkswagen Polos…………preferring us to buy higher powered BMWs & Mercs.
Zee Fiat 500s & Citroen C2s are a threat to our way of life , vee must change.

On a more serious point – it shows how absurd “revenue raising” measures are as they conflict with national goals.

PS although the almost German Skoda Fabia estate Greenline seems to be the most efficient beast of all.
Do they still make it ?

A independent CB would defecit spend and make smaller cars the only option for the middle class.

The Tax Revenue increases projected are as follows: (Table 11)
2013 2.5 billion
2014 2.7 billion.

However Table 8 indicative measures on give the following figures:
2013 1.18 billion
2014 1.10 billion.

So where is the rest of the tax going to come from. Growth?

It would be interesting to know the contingency plans in the event that an undershooting of GDP requires further spending cuts or tax increases.

Indeed it would. As we are already undershooting GDP it would be well to be reassured that the answer will not be to shoot people with disabilities and single mothers.

“social transfers (row 18) down from 18 percent of GDP in 2010 to 13.6 percent of GDP in 2015”


That should be easy politically, what with the labour party’s commitments on social welfare!

I’m starting to get the feeling that the low hanging fruit has been picked, and between the Croke Park agreement, commitments on welfare and commitments on income tax something is going to give – just look at the u-turn on disability benefit

What will happen is that the State will start under funding things in order to keep pay, transfers and income tax where it is.

So we will get crap healthcare, crap prisons, crap everything that is provided by the state. You can see it starting already. It reminds me of that Michael Lewis Vanity fair article on Californian cities.

Cutting public service numbers instead of public sector pay seems to be a clear method of doing that – just stop hiring and stop replacing staff that leave – the losers being the unemployed and the users of public services.

You can also see the lack of political will by the failure to plan for the eventuality of lower growth. Surly this is an obvious thing to do.

Imagine if we created money out of thin air, therefore we would be able to tax it and owed it to ourselfs rather then the IMF thin air money that carries a external interest………….
You cannot tax sustainably a declining credit money system when people decide to pay back the debt.

Then you would not need to artifally increase growth above long term productivity gains so as to sustain the insatiable appetites of the priesthood.

Our exports are already something like 90%+ of GDP although mainly multinational in origin which is one of the most extreme examples in the world.
Exports of 90% GDP is not a badge of honour , it is a mark of shame – as colonies export their wealth.
We have sold our soul for this meagre bread crumbs from the master revenue stream – with no inherent redundancy to fall back on (Iceland still has people who can fish and harvest cheap geothermal energy).

Despite what Micheal Hennigan states I can remember thriving fishing ports even up to the mid 1980s – go to Dingle & Castletownbere now and you see absurdly large trophy houses but no honest work.

We are a Freak show , a global laughing stock.
Our people have mutated into something horrid – a victim of extreme credit radiation exposure.

@ Christy

I think Croke Park will get the heave ho. The IT editorial gave it a heavy jostle today and Stephen Collins was pulling timber . All the easy choices have been taken already and there’s another meitheal of billions in cuts to go.

Anyone know what the Govt projected income that corresponds to the projected 3% deficit in 2015 is ? Will spending come all the way down to the 30s or does income rise into the 40s ?


These projections would be much more useful if they planned for different potential futures.

So if growth comes in at an average of 0%, or 1%, or 2% or 3%

Then we could see with alot more clarity where we are at. Now you could say this would take a lot of time and effort but I mean that’s nonsense given the importance of the issues at stake.

once published the government could say to the opposition – well, what would you do instead under each of the scenarios?

Then there could be a real debate about “what’s to be done”. But we won’t get anything like this – instead we will have the gov in effect hiding its plans – or even worse not making any – and we will have the opposition giving out about each cut and tax rise without putting forward a coherent alternative.

It’s really not good enough – and teh answer, well that’s politics – is vacuous nonsense – if that’s politics then lets change politics

I take it back – looking at the new road tax you are still mad not to buy a A or B rated car.(never mind the fuel savings)
We should have a Italian like road fleet in 5 to 10 years if we remain withen the Euro.
If we are out soon we will probally depreciate our existing fleet more efficiently in a Cuban style manner.
I can’t help thinking that the rise of car sales during 2010 & 2011 period from its 2009 nadir has at least partially got to do with guys thinking they better spend their euros on a high value capital good while they still can.

In a Inflation the best way to save money is to spend it.

@DoC: “Imagine if we created money out of thin air, therefore we would be able to tax it and owed it to ourselfs …”

Er, I thought that was what have been doing for some time now, eh?

“You cannot tax sustainably a declining credit money system when people decide to pay back the debt.”

Yes you can. You apply VAT @ 25%. Now there!

I’ll cross keyboards with you some other time about the ‘colony’ bit. We were never a colony, but we did pretend awfully hard. Snow job, not the
b**w job! Good for a crawthumping Hollwood flictionette.

Lots of green fields to dig and hoe. And rivers and lakes to fish. Provided the ‘farmers’ stop spreading their inorganic and organic waste products about the landscape.

@ Christy: “So if growth comes …” You mean ‘goes’? Yep, that’s it.

Cretins come to mind, but that is a tad untasteful. Undead?


I mean money , not credit which is getting repaid or defaulted on – the CB / Treasury can therefore interbreed again
We have a foregin currency that we must pay tribute too via the offical external banks.

The troika loans are externalising our money supply – thats not fair – anybody can create thin air money and keep the interest internal.
Our misfortunes although we were never the most efficient nation comes from a wildly destabilized money / credit supply – both on the way up via excess credit and on the way down via not enough money.
Companies other the banks with inside knowledge cannot profit from this wild destabilization.
Therefore Investment in anything long term comes to a screeching halt – hence the euro crisis.

God help us but we are banked to death – everybody suffers but the new money creators under these circumstances.

@ All

The options proposed by Van Rompuy and now taken up by the Commission. The two “avenues” are not “mutually exclusive” (page 2) but there is likely to be a major bust-up at the cross roads.

No doubt, there will be the usual shock, horror reaction to the issue of corporation taxes (and the setting off a few mines unwittingly on behalf of another interested party).

Theres been probally a agreement between France and Britain regarding the “Irish question” for some time.
Just give the stupid Micks no way out.
They have served their purpose of hiding the elites income stream – now the world has changed , its time to spit them out.

Not to worry , they will come crawling back – what else can they do ? they know nothing else now as they have lost a broad skill set.

The Uri was implanted here a long time ago – the IMF Tallaght strategy of increased leverage using Irish faces was the spark I guess – as always we were late to the game but made up for it with our enthusiasm to be the best boy in the class.
Voodoo economics has a nasty habit of betraying you.

@ All

An outstanding analysis from Quentin Peel.

The only question he does not address is the implication of the UK opt-out from the euro. (The Danish opt-out is not comparable as Denmarke is in the ERM II stage of monetary union and the krona is effectively locked to the euro). If the UK is not a fully paid up member, why should it have the rights of a fully paid member? A knotty question with implications for John Bull’s Other Island.'s_Other_Island

We never had a real central bank – the Punt was a sick joke.

It was a result of Britain getting Gutted by the IMF boys when they did their Man from Uncle enforcement thingy.
The powers that be gave us something to play with – thats all.
Meet the new boss , same as the old boss , meet the newer boss same as………

We were good for a bit of a laugh anyhow.

@ Foo

The leaders of France and Germany have called jointly for eurozone countries to have common corporation and financial transaction taxes.

Debt forgiveness will only apply to Greece, Financial Transaction tax and more regulations for IFSC. Common Corporation Tax ……

Enda…Corporation Tax is OUT!
Enda…..Financial Tax is OUT!
Enda…..No debt forgiveness!

I hope Enda gets what he needs from the summit 🙂 See you at the demonstration..

Looks like they’re raising membership charges to levels we can’t afford! I wonder is there a message there for us? Ah, well, time to pay a polite visit to George Osborne,
but he’s got lot of downside risk from the EMZ crisis as well.

“As Europe’s bond market dries up, traders fear for jobs”.

surely the HSE will have employment for large numbers of leeches after round 9 of the eternal adjustment process

Well if all that Merkozy has to offer – a stick with no carrot, then we are better off getting out before the whole rotten edifice falls in. I suspect a few other countries will conclude that default and exit is the least cost solution.

@ All

Storyville on BBC2 ……………. just in case anyone needs a refresher on what happened and who is responsible for being irresponsible.


Thank you for that le Figaro post. [Google translate a bit turgid on it].
I wondered if you got the time to do a short summary of the positions at this point.

On a related point, many would disagree with the point that it was the Deauville summit that scared investors.

Cette décision, juste moralement, a eu pour effet de dissuader les investisseurs de prêter de l’argent aux États

It can be strongly argued that it was the negation of Credit Defaults on the debt that panicked investors. After all until that point during the Greek ‘negotiations’, investors could protect themselves. Following the Greek voluntary PSI debacle, it became clear that credit insurance contracts were worthless

My view is that PSI should remain in. Ireland’s position on this self defeating and stupid.

If some of my posts tend to be anti Europe at present it is something I cannot avoid. Each time I think about bank debt my blood boils. Rationality goes out the window. At this point, I fail to see any way out for Ireland financially or otherwise ,except to start to stand up to the bullies even if it costs the country dearly. Our leaders do not seem to realise that we are being made to play by rules when it suits the big boys, but the rules are readily discarded when the big countries breach them.
In this respect I note from a Karl Whelan post that the ECB picked up the tab for Lehmans AG Bank going bust. The ECB had a nice neat rule that allowed that.

@ Joseph Ryan

All I can say is that this is a blog about economics in its broadest sense i.e. political economy (which is the only correct description of the discipline as far as I can judge) and that the overriding emotion should be a dispassionate one as that is the way the game is played.

It seems to me that large head of steam is building up against the antics of Merkozy and of the Sarkozy element in particular. He is, for example, playing electoral politics with the issue of the “golden rule” as the Left now controls the French Senate and is refusing to countenance it. Such behaviour is almost unheard of in a European context but is now being emulated in the UK. It seems to be the order of the day in Germany. Perhaps the most promising indication is the fact that the most recent “hardline” spokesman would speak only on the basis of anonymity. However, “faule kompromissen” are to be rejected. (It is not as bad as it sounds. It means lame compromises).

It is also clear that the duo and their advisers have not got a clue about what is happening in the real world cf. Mickey Hickey’s link above on the collapse of the European sovereign bond market.


We’re not there yet; remains an option.

IF Greece is FORCED out – entire dynamic changes.

@all Those who know there are other ways out of this catastrophe …

A Minsky Moment from Bard College: Marshall Auerbach

Toward a Workable Solution for the Eurozone

Although it didn’t originate with an economist, the malaprop “It’s déjà vu all over again” is invariably what springs to mind in the aftermath of virtually any euro summit of the past few years, all of which seem to end with the requisite promise of a so-called “final solution” to the problems posed by the increasingly problematic currency union. But it’s hard to get excited about any of the “solutions” on offer, since they steadfastly refuse to acknowledge that the eurozone’s problem is fundamentally one of flawed financial architecture. Today’s crisis has arisen because the creation of the euro has robbed nations of their sovereign ability to engage in a fiscal counterresponse against sudden external demand shocks of the kind we experienced in 2008. And it is being exacerbated by the ongoing reluctance of the European Union, European Central Bank, and International Monetary Fund—the “troika”—to abandon fiscal austerity as a quid pro quo for backstopping these nations’ bonds.

@Joseph Ryan
“It can be strongly argued that it was the negation of Credit Defaults on the debt that panicked investors. After all until that point during the Greek ‘negotiations’, investors could protect themselves. Following the Greek voluntary PSI debacle, it became clear that credit insurance contracts were worthless”
+1 on on that – the logical extension is that any contract is worthless – not just subject to the normal risks, standard sovereign default that over the long run ends up being mostly paid back (once inflation has done its bit), but black swan events where new risks are introduced.

The anti-market sentiment in the German and particularly the French government has come home to roost. Up yours Merkozy, we’ll take our stinking dollaros elsewhere. We don need no stinkin’ bunds…

@ Hogan/Joseph Ryan

The issue about PSI is that it made government bonds seem risky. It’s not rocket science. And only a limited proportion of bond investors buy CDS, if nothing else it’s too expensive, as well as being outside the remit of many of them (it’s an evil derivative don’t ya know). For instance, buy Spanish 5yr today at 4.85%, hedge with CDS at 370bps, real return per annum for five years 1.10%, but still faced with now multiple basis and mtm issues if you want to unwind, as well as liquidity concerns. What’s the point?

@Mickey Hickey

‘Perhaps because of the economic situation, Switzerland isn’t the only country taking a look at the establishment of a minimum wage. Earlier this month, Germany announced that it would institute its first ever minimum wage. The minimum wages will be sector-specific.

Also earlier this month, the European Parliament began discussions on instituting a Europe-wide minimum wage.

“In 2010, 116 million people— 20% of our citizens— were threatened by poverty and 42 million people— 8% of Europeans— lived in a state of extreme material deprivation,” said Belgian Socialist Party member Frédéric Daerden, who authored the report adopted by the European Parliament.’

Switzerland has a democracy within which the term ‘Active Citizenship’ has real meaning. Very high turnouts are recorded, for example, on issues related to local taxation, rights, and freedoms. European Democracy could learn a lot from Swiss Active Citizenship.

@all on CDS

This is why Herr Geithner is in Europe – Wall St. 2_BIG-to_Failers can’t afford to pay out on them should one silly European ‘accidently’ trigger a BIG ONE (-; I’m lookin …. DeutscheBanke would bring the house down – And the Bundesbanke would have to call on the ECB … well, if that’s what it takes – the sooner took the better …. [h/t stanley yelnats, Holes – available on Amazon]

“Imagine if we created money out of thin air, therefore we would be able to tax it and owed it to ourselfs rather then the IMF thin air money that carries a external interest.”
Dork, going back to the Punt would come with its own downsides. In order to get to a balanced budget, you would have to print more money (or else borrow money and pay even higher interest rates). You apparently are concerned about inflation in the Eurozone (imho rightly so, me too) so you probably know that inflation hurts the lower and medium incomes, the working population, unemployed and retirees, the hardest, but not so much those who own the productive means. So, having your own “thin air” money again would put a high burden on those who can least afford it, too.

Afaics it’s better for Ireland to stay in the Eurozone and to make the reforms more socially acceptable by taxing the higher incomes more and using the money for job programs. Even within the EU/IMF guidelines, there is some leeway for making corrections, as long as they’re cost neutral. But I guess such policies aren’t likely with the current Irish government, right?

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