Government must stick with austerity, says Brian Hayes

The Government must not falter on meeting its commitments for reducing national debt and balancing the budget. Failure to do so would be a dereliction of duty, said Brian Hayes.

Rather, the next budget should apply the cuts and tax increases needed to reduce the State spend by more than €3 billion and do it ahead of schedule if possible, the Minister of State for finance said at the Glenties Summer School.

Mr Hayes was speaking during a session entitled “Managing the economy and public finances after the Troika”.

The goal of reducing the budget deficit to less than 5 per cent by 2014 was almost complete. To falter now, when success is in sight, would be a serious dereliction of duty, he said.

“If we falter now the electorate would rightly punish us if things went wrong and Ireland was forced into a second bailout.”

He accepted the logic of the argument put forward by Government colleagues in Labour that the goal was to reduce the deficit to agreed levels by 2014, he said speaking before the session.

However, “accomplishing this ahead of schedule would strengthen our ability to raise funds on international markets at advantageous terms.We should push on and finish the job ahead of schedule if possible,” he said.

As far as the budget deficit is concerned size does matter, the smaller the better.

Prof Tony Foley, head of the economics group at Dublin City University, said the EU-IMF troika may leave but we will not be escaping supervision. “There is no after the Troika”; there will be ongoing oversight by the European Central Bank and others, he said.

The State will have to continue to go to the markets to recycle the existing borrowing, he said.

“Maybe such supervision is not such a bad thing. We are not very good at looking after our own affairs,” he suggested.

The bottom line was to stick with the programme, Peter Breuer, the International Monetary Fund’s resident representative to Ireland, told the meeting.

The Irish economy faced ongoing challenges given limited growth and the costs of stabilising the economy. There was also the need to bring the financial sector back by recapitalising the banks.