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Irish Fiscal Advisory Council Reports

Dáil Éireann Debate, Wednesday - 14 November 2012

Wednesday, 14 November 2012

Questions (93, 96)

Micheál Martin

Question:

93. Deputy Micheál Martin asked the Minister for Finance his views on whether the recommendations of the Fiscal Council should be implemented; and if he will make a statement on the matter. [42653/12]

View answer

Micheál Martin

Question:

96. Deputy Micheál Martin asked the Minister for Finance if he has received the recommendations of the Fiscal Council; and if he will make a statement on the matter. [45673/12]

View answer

Written answers

I propose to take Questions Nos. 93 and 96 together.

In line with normal practice, the Fiscal Council forwarded its September 2012 Fiscal Assessment Report to me just before its publication. The Fiscal Council’s analysis and recommendations were considered in my Department’s preparation of its updated economic and fiscal projections, which will be published this month in the Medium-Term Fiscal Statement (MTFS).

The Council believes that it would be prudent for the Government to implement more consolidation than currently planned so as to achieve a deficit of 1.9% of GDP in 2015. This would require €1.9 billion in additional consolidation over what is set out in the SPU for the period 2014-2015 but would result in a significantly improved debt trajectory. The Fiscal Council suggested that there be no additional consolidation in 2012, but further consolidation of €0.4 billion in 2014 and €1.5 billion in 2015. The Council suggests that this could provide additional fiscal sustainability, by front-loading the consolidation necessary to meet the General Government Deficit target of 3% by 2015.

While the Fiscal Council suggests that it would be prudent to undertake additional consolidation in 2014 and 2015, it states that the additional adjustment is not recommended lightly given the existing pressures on domestic demand and the high burden of unemployment.

The Government is very conscious of the potential impact additional consolidation could have on economic activity. In striving to restore sustainability to the public finances, it is necessary to also be mindful of protecting the emerging economic recovery and seek to strike the right balance between the two. This balancing act is difficult but the Government view is that a reasonable balance has been achieved. The consolidation completed to date has been achieved with remarkable social cohesion, and the adjustment path is supported by the European Commission, ECB and IMF. The fact that the Council sees Ireland achieving its deficit targets on the basis of the already committed adjustments reinforces this view in that regard. However, we will continue to closely monitor economic developments and will take the measures necessary to meet our targets.

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