Stability Programme Update

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11 replies on “Stability Programme Update”

Odd result: Ireland has succeeded in persuading the EU to determine potential growth on an annual basis and the resulting increase has given the Minister around €1bn more than envisaged for the 2016 Budget although the projected decline in the structural deficit is only 0.4% and hence in breach of the SGP.

Another point is that Finance have projected unchanged nominal current spending out to 2020 and a substantial improvement in the structural deficit. Whatever government is in power from 2016 will continue to face significant fiscal constraints.

More figures out today confirming that the Celtic Tiger is back.

Retail sales in March up 9.2% in volume y-o-y.

Number of overseas tourists to Ireland in Q1 up over 14% y-o-y.

Average house prices up 0.9% in March, bringing the y-o-y increase to 16.2%, the highest to date since the recovery in house prices began in 2013. It appears that far too much significance was given to the fall in house prices in January and February. The figures are not seasonally-adjusted and house prices are normally weak in January and February. The fall this year was less than that last year. No evidence yet that the Central Bank restrictions on borrowing are having any effect.

Looking ahead: expect another sharp fall in the live register tomorrow, bringing the unemployment rate well below 10%.

A bit of a damp squib, as evidenced by lack of comment here.

‘No return to boom & bust’, except that dangling tax cuts while continuing to underinvest is straight out of the FF playbook.

May pull off the feat of leading to a bust without ever enjoying a genuine boom beforehand.

Form today’s Irish Times:

Alan McQuaid from Merrion Stockbrokers noted the 16.8 per cent year-on-year rise was the largest annual increase since the height of the property boom, suggesting there is still life left in the current housing market rally.

“It does now look as though the monthly declines in house prices in the first two months of 2015 were weather related, with the lack of supply the key driver of prices,” he said.

“Although the tighter lending restrictions imposed by the Central Bank and the end of the Capital Gain Tax property purchase incentive scheme may weigh negatively to some degree, it appears that house price growth may be stronger in 2015 than we previously envisaged.”

@Dan McLauhlin,

The Commission and the Council gave in to France on the EDP. Both instititions are keen to preserve Ireland’s “austerity poster-boy” status – and to keep Ireland fully onside while bashing the Greek government. They’ll turn turn a blind to a fraction of a percent up or down.

In any event, there’s a half a billion or more that will be taken out of the GGB when sufficient pressure is exerted on Eurostat to declare that Irish Water meets this famous Market Corporation Test. The fact that Ireland has ended up with the most inefficient and ineffective restructuring of the water sector and system of water charging (that fully protects the embedded rent-capturing special interests) – and that the system of economic regulation has been revealed purely as a policy implementation mechanism – is neither here nor there when there’s an election to be won and the EU project is dealing with a potential existential threat.

Like the UK waving the risk of Brexit, the Government has the Council and the Commission over a barrel – though it wouldn’t want to overplay its hand.

The annual Stability Programme Update has been around for many years now, in compliance with EU requirements, and usually receives only passing media attention. The difference this year is that the Government has chosen to use it as the basis for a Spring statement. Had the EU not agreed to change Ireland’s reference rate for allowable expenditure one wonders if the Government would have bothered, as prior to the change the available Fiscal Space was negligible.
The Department of Finance has only revised up this year’s real growth forecast by 0.1% but growth in 2016 is now projected to be 0.4 percentage points higher, albeit offset by 0.2 percentage points in lower growth in 2017 and 2018.On this year’s deficit outturn the Department is projecting a €1bn overshoot in tax receipts, which is a 2.4% overshoot relative to profile. The current overshoot is 5.5% which if maintained would leave tax receipts €2.3bn above target at year-end.

On the subject of playbooks, one wonders to what extent the members of the Dáil are aware that, since the Lisbon Treaty, Ireland is signed up to the concept of a social market economy or, indeed, if they are, whether they have any idea as to what it means or as to its origins.

To quote the wiki, the main elements of the social market economy in Germany are given below. (The elements would be equally valid in any of the wealthier member countries of the EU and, as they are at least aspired to in the rest, the adoption of the concept in the Lisbon Treaty gave rise to no real difficulty).

“The social market contains central elements of a free market economy such as private property, free foreign trade, exchange of goods, and free formation of prices.

In contrast to the situation in a free market economy, the state is not passive and actively implements regulative measures. Some elements, such as pension insurance, universal health care and unemployment insurance are part of the social security system. These insurances are funded by a combination of employee contributions, employer contributions and government subsidies. The social policy objectives include employment, housing and education policies, as well as a socio-politically motivated balancing of the distribution of income growth. In addition, there are provisions to restrain the free market (e.g., anti-trust code, laws against the abuse of market power, etc.). These elements help to diminish many of the occurring problems of a free market economy.”

None of the political parties have the above as a playbook. For this reason, the parts they play in the Dáil are interchangeable. Spokesmen invariably confine themselves to attacking the bits that are obviously missing in the socio-economic scenario as being the fault of “the other side” without anyone actually doing much about it (notably in the matter of universal health care, uniform employment and pension conditions and imbalances in the education sector).

The Irish electorate seems to like it that way. Or, at least, one must assume so if their political support can be sought on the basis that the percentage of government intermediated funding is set, at best, to be static – notably in relation to investment – at its present much reduced level.


Be careful with the CSO residential property price index and conclusions about “house prices in March”.

CSO data is derived from mortgage draw-downs. Data for March is reported after completion of real estate transactions agreed, on average, probably something like 2 – 4 months earlier.

I would interpret this data as being informative about house prices in December, or thereabouts.


Be careful with the CSO residential property price index and conclusions about “house prices in March”.

Fair point.

My argument was that those who claimed on the basis of the Jan-Feb figures that house prices were already slowing down or falling have been proved wrong. Jan and Feb figures are usually the worst months of the year for house prices. The figures up to March show no evidence whatever of any slowdown or fall. The y-o-y increase in March was the highest since house prices started rising in 2013.

But, as you correctly say, if there is a time-lag of a few months, then we need to wait until later in the year to see if the Central Bank restrictions are having an effect that will outweigh the shortage of supply.

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