Category: Fiscal Policy

Ireland exits the EDP

Unsurprisingly the European Commission have concluded that Ireland’s “excessive deficit” per the reference values in the TFEU has been corrected.  The Commission decision is here.

The Commission have also published their country-specific recommendations on Ireland based on this staff report.

There is lots in the staff report but on the fiscal side in introducing their CSRs the Commission note:

[Following the abrogation of the excessive deficit procedure, Ireland is in the preventive arm of the Stability and Growth Pact and subject to the transitional debt rule.] In its 2016 stability programme, which is based on a no-policy-change assumption, the government plans gradual improvements of the headline balance until reaching a surplus of 0.4% of GDP in 2018. The revised medium-term budgetary objective  a structural deficit of 0.5% of GDP – is expected to be reached in 2018. However, the annual change in the recalculated11 structural balance of 0.1% of GDP in 2016 does not ensure sufficient progress towards the medium-term budgetary objective. According to the stability programme, the government debt-toGDP ratio is expected to fall to 88.2% in 2016 and to continue declining to 85.5% in 2017. The macroeconomic scenario underpinning these budgetary projections is plausible. However, the measures needed to support the planned deficit targets from 2017 onwards have not been sufficiently specified. Based on the Commission 2016 spring forecast, there is a risk of some deviation from the recommended fiscal adjustment in 2016, while Ireland is projected to be compliant in 2017 under unchanged policies. Ireland is forecast to comply with the transitional debt rule in 2016 and 2017. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Ireland is expected to broadly comply with the provisions of the Stability and Growth Pact. Nevertheless, further measures will be needed to ensure compliance in 2016.

The Commission press release detailing all of the decisions taken and documents published today is here.

What should an Irish Parliamentary Budget Office Do?

Parliamentary Budget Offices (PBOs) exist around the world and typically provide budget projections, budget risk analyses, estimates of policy changes, impact assessments, flow of funds analyses, macro-trend analysis, and financial analysis where, prospective policies can be independently costed. The PBO also has an outreach function to show the public the work parliament does in assessing the fit of new proposals.

PBOs are different from Fiscal Councils, in that fiscal councils occupy a watchdog function, evaluating the health of the economy generally and assessing compliance with constitutionally-mandated fiscal rules. Ireland has a fiscal council, it does not have a PBO. The new programme for government commits (on pages 14 and 15) to establishing one.

Continue reading “What should an Irish Parliamentary Budget Office Do?”

New Programme for Government: Open Thread

Given that an agreement looks likely, it’s probably worth opening a thread on what commenters believe the new programme for government should contain, what it might contain, what that weird intersection of politics and economics means it will contain.

Draft SPU Update: Risks

The Department of Finance has released a Spring-less Statement (.pdf), showing some interesting debt dynamics projections and a really nice risk-assessment section (see page 26) and their likely impacts on the Irish economy. Brexit figures highly, as one might imagine, but so do other external demand shocks and domestic issues, and the fiscal risks associated with not meeting our climate change targets. The Department writes:

There are fiscal risks associated with a legally binding EU Effort Sharing Decision on climate change covering the 2013-2020 period. Ireland is obliged to achieve a 20 per cent Greenhouse Gas emissions reduction (compared to 2005 levels) in certain sectors. Current EPA projections estimate that Ireland will not achieve this reduction and failure to comply may incur costs of hundreds of millions through the purchase of carbon credits until such time as the target is complied with. Similarly, further new costs may arise in the context of a new EU climate and energy framework for the period 2020-2030, which will set new emissions reduction targets.

Scary stuff.

Broad tax bases are desirable

I notice that there is no election thread, which makes sense given that we were probably all fed up with the campaign before it even began. And I’ve nothing original to say on the subject either. But there probably should be an election thread, and if there is to be one, someone has to kick it off by saying something. So, in that spirit: do we all agree that (a) the Irish economy is now recovering, and doesn’t need further stimulus right now; (b) that the Irish economy has proved itself over previous decades to be unusually volatile; (c) that the international outlook right now suggests that there are risks on the horizon; (d) that the Eurozone is a very dangerous place to be anyway, if you are a small country; (e) that broad tax bases are preferable to narrow tax bases; and (f) that given all of the above, arguing for the abolition of the USC or water charges (water charges, as opposed to Irish Water) is grossly irresponsible, and should suffice to disqualify a party from being taken seriously as a “safe pair of hands”?