Dáil Éireann Debate, Wednesday - 20 March 2013
195. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economic fundamentals have changed in the course of the past six years with particular reference to the need to achieving established and or accepted targets for borrowing, lending, growth and debt ratios; and if he will make a statement on the matter. [14254/13]
View answerFollowing three successive years in which output fell, positive growth returned to the Irish economy in 2011. With GDP up 0.8% (y-o-y) in the first three quarters of 2012, a second successive year of growth is expected to be confirmed tomorrow when the CSO releases its first full-year estimate for GDP in 2012. The recovery is forecast to gain ground in 2013. Over the medium term, a return to robust and more sustainable growth is foreseen. While exports are expected to continue supporting economic activity, a gradual pick-up in domestic demand is also projected as the recovery broadens further and spills over to the labour market. We have also seen that 2012 marked the largest increase in net job creation by IDA client companies in a decade. All of this points to the fact that many of the underlying strengths of our economy remain, including a well-educated workforce, favourable demographics, an open and flexible economy and a pro-enterprise environment. Of course there are many challenges which we still face and it will take time to work through the legacies of the crisis. Not least of these is the high level of Government debt which we have accumulated. However the debt-to-GDP ratio is expected to peak this year and begin to fall from next year onwards.
In order to reduce the deficit, consolidation measures amounting to around €28 billion or over 17 per cent of estimated 2013 GDP have been implemented since the crisis began. This represents about 85 per cent of the total consolidation required. This is an ambitious programme of fiscal consolidation, accompanied by structural reforms, to improve the fiscal position of the State. We will continue to pursue this policy of fiscal consolidation, while making the adjustments as growth-friendly and equitable as possible, to ensure that the deficit is reduced below the 3 per cent of GDP target by 2015.
The Government recognises that SMEs are the lifeblood of the economy and will play a vital role in the recovery of employment growth in our country. One of the key priorities of the Programme for Government is to ensure that an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme. The Economic Management Council meets the banks on a regular basis and discusses the key issues pertaining to this priority. My officials also meet regularly with key stakeholders at the forum of the SME Funding Consultation Committee.
The Government has imposed SME lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks have reported that they achieved their 2011 and 2012 targets.
In addition to the lending targets imposed on the banks, the pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. The banks also meet with the Department of Finance and the CRO on a quarterly basis to discuss progress. The monthly management meetings with the pillar banks also provide a forum for the issue of SME lending to be raised by the Department.
It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.
