The Staff Report on the Commission’s latest review of Ireland’s EU/IMF programme is now available. It does not contain much that is new. There is this on page 20.
Ireland’s fiscal stance has not been overtly pro-cyclical since the beginning of the crisis. Using conventional metrics, discretionary fiscal policy has been clearly leaning against the wind in 2008 and 2009, and did not move openly or blatantly into the wind in 2010 and after, in spite of the significant budgetary adjustment efforts put in place by the Irish government (Graph 2.1) (14). Fiscal policy remained, and is expected to remain broadly in line with the stabilisation function of discretionary fiscal policy, or at least not to run counter that function. In the early years (2008-2009) when fiscal policy was incontrovertibly counter-cyclical, the fiscal policy strategy mainly consisted of correcting previous policy commitments built on optimistic growth projections accompanied by the fact that in a deflationary environment, nominal expenditure freezes implied increases in real terms. Since 2011, the improvement of the structural deficit has taken place in an environment of slightly improving economic conditions.
This is Graph 2.1. Click here to enlarge.
Maybe footnote 14 is important:
(14) The structural changes of the economy during the economic crisis are beyond normal business cycle fluctuations. Therefore, potential growth and structural government balance estimates need to be treated with caution.
2 replies on “EC: Summer 2013 Programme Review”
From the report P. 14:
“The revised national accounts data have prompted a downgrade of growth forecasts. Real GDP is now expected to grow by 0.6% in 2013 and by 1.8% in 2014, compared with 1.1% and 2.2% at the time of the last review (Table 1.1)”
From the Irish Times, October 9th:
“John McCarthy, a finance official, told the committee [IFAC] that the projections for 2013 had fallen from 1.8 per cent at the time of last December’s budget to 0.2 per cent as of mid-September. He also confirmed that the growth rate for 2013 now looked likely to be 0 per cent.”
So for 2013 we have Troika revising down GDP forecast from 1.1% to 0.6%
And DoF (acceptable to IFAC) 1.8% to 0.2% to 0% as the year progressed.
The only problem with the trusty envelope – which is still proving more accurate that any of the above – is that it isn’t pessimistic enough.
See comment at 8.39.
Also, not that as of June 2011 DoF was planning on growth this year of 3%., whilst in the autumn of 2011, EU Commission was predicting growth of 2.3%.
Does anybody know of an example of an abjectly foolish state that took on an odious debt of 50% GNP ….. and prospered?