Date Released: 10 July 2013
The Nevin Economic Research Institute (NERI) welcomes the most recent Medium-Term Review published by the Economic and Social Research Institute. It provides a significant addition to the debate on policy options and possible future economic recovery pathways over the remainder of this decade.
The NERI does not share some of the policy implications outlined in the ESRI Report. Specifically, the suggestion of implementing, in full, the budget adjustment of over €3 billion in this Autumn’s budget for 2014 is not supported. It is suggested by the authors of the ESRI report that a full adjustment of €3 billion would be a prudent measure in case economic growth stalls further. However, economic growth has stalled last year and this partly because of the continuing impact of fiscal austerity over six successive years.
Responding to the ESRI Report, Dr Tom Healy, Director of the NERI commented: ‘Now is the time to ease back on the size of the consolidation and allow more breathing space for domestic demand to recover. Research by the NERI indicates that in the absence of a more timely and ambitious investment stimulus, there is a higher risk of missing the 3% budget target through large-scale fiscal consolidation such as that planned by the Government before the Promissory Note deal in February of this year and suggested today in the report from the ESRI’.
In its most recent Quarterly Economic Observer, the NERI has proposed:
· full use of the proceeds of the ‘Promissory Note’ deal to reduce the fiscal consolidation by €1 billion in the coming budget;
· a fully commercial investment stimulus of €4.5 billion over the next 30 months;
· increases in capital and income taxes for the top 10% of households (by income).