Troika not ruling out mini-Budget in 2012

The Sinn Fein finance spokesman, Pearse Doherty has tweeted following his party’s meeting with the bailout troika of the ECB/EU and IMF, that “Troika wouldn’t rule out mini budget latter this year if we r not able 2 meet targets – told me we will cross that bridge if we come to it” This is at odds with IMF statements late last year which said that further adjustment would not be required in 2012 even if slow economic growth were to mean the target for 2012 – getting our budget deficit down to 8.6% of GDP – were not met. The IMF said “the planned amount of fiscal adjustment should be maintained in the event of adverse developments to avoid amplifying policy procyclicality.” If Pearse’s tweet is confirmed, then it seems to indicate a shifting of position.

Separately, Independent TD Shane Ross challenged An Taoiseach Enda Kenny in the Dail this morning over official projections of economic growth in 2012. Budget 2012 projected real Irish GDP to grow by 1.3% in 2012 which is higher than recent forecasts from the EU, ESRI, IMF and some economists, which have tended to be in the 0-1% range. Enda however insisted that he was optimistic about the official growth projections and reminded us that the economic situation in our export markets is fast-changing and that it is too early to abandon the official estimates. That is fair enough, but you would have to say, having considered the number of forecasts below our official forecast, that there is more downside risk than upside. The effect of lower economic growth is we bring in less taxation, we probably spend more on social welfare and the deficit % of GDP increases.

So the above is of concern. But what really seems concerning from this perspective is that whilst the rest of Europe is focussing on strategies to engender growth, the heart of Europe seems unconcerned about Ireland and the ongoing austerity. When the ECB president Mario Draghi spoke last week about Europerecovering from the economic crisis, he spoke of an acceptance for the need for growth measures. But when by Derek Scully from the Irish Times asked (from about 54:00 on the video of the press conference) about how programme countries (Portugal, Ireland and Greece) might develop growth measures, Mario was emphatic and said no, he wasn’t giving a green light for programme countries to abandon austerity and deficit balancing so that they could pursue job creation measures for example.

Unemployment figures released for the UK this morning showed that the Northern Ireland unemployment rate now stands at 6.8% compared to 14.3% here in December 2011. With a mini-Budget a possibility, with lower than projected growth a probability and with sky-high unemployment, it seems the country needs growth measures more than ever.