Outrage concerning the disclosures should be directed at those who landed us in the mess

IT IS hard to share in the national indignation – half-hearted though much of it may be – about the disclosure of our budget plans to German MPs.

One suspects that much of the anger in Government circles stems from the revelation of the true extent to which we have ceded authority in economic affairs to external partners.

One of the more remarkable achievements of this administration is the extent to which they have managed to convey the opposite impression.

The troika of the European Commission, the European Central Bank and the International Monetary Fund have played along because they see little advantage in rubbing our noses in it. But the truth has always been that once the troika became our only source of finance the balance of power shifted.

Thus any residual anger you may have left is best directed at those that got us into this mess, rather than German MPs whose scrutiny of our budget is simply a consequence of our turning to them for help in the first place (and the machinations of the German constitutional court).

There are in fact several positives in the whole affairs; not least that the faux drama of budget day has been significantly spoilt. The notion that the Government’s economic and fiscal policies for the coming year should be debated in secret and then revealed on budget day as a fait accompli is outdated and probably played its part in the mismanagement of the economy.

But the real significance of the events of last week is that the shape of budget 2012 is now clear and more importantly it has been approved by the Germans, the most influential part of the most influential part of the troika – the European Commission. Included in the documents released last week was a letter from Steffen Kampetter, the German finance ministry state secretary, in which he says the federal government – which has presumably also reviewed the budget plans contained in the documents – is in favour of paying the next tranche of money to the Republic.

And what is interesting about this implicit German approval is that it is for a budget which by current standards is not that austere. Germany has approved a budget that will try and avoid income tax hikes and social welfare cuts. It is a budget that makes a modest start to introducing a property tax and makes no mention of water charges. The main tax-raising measure is an increase in VAT, which does not offer the certainty of direct taxation.

The Germans’ acquiescence with the plans is very surprising when you consider that the euro zone crisis has entered a new and more acute phase and the German solution to the problems is austerity heaped upon austerity.

The Germans also approved a budget that falls short of the recommendations of the Fiscal Advisory Council, set up by the Government at the behest of the troika. The council had called for a fiscal adjustment of €4.4 billion rather than the €3.8 billion proposed by the Government.

Why the Germans have gone along with this is an intriguing question. It is probably the culmination of a number of factors, one being that the Government has earned a modicum of trust as a result of the way we have implemented the current programme.

It is also undoubtedly the case that despite the stereotyping the Germans only have a limited appetite for interfering in this State’s affairs.

But arguably the most significant inference that can be drawn from all of this is that the troika, including the Germans, are not blind to the fact that the austerity approach is not a panacea, may not be working and if taken too far too soon can be counterproductive as in the case of Greece.

The Republic may well be the poster child for the new style of bailout, but that is not to say it is an unqualified success. The troika are feeling their way as much as anyone else in the current environment.

No one can deny that three years of austerity has wrecked consumer confidence and depressed consumer demand to a level where negative feedback effects may be taking hold. If they do, it will be at the worst possible time as the strong export-led growth that has sustained the economy will be severely tested if the global economy starts to slow.

Giving taxpayers a break of sorts – albeit with the promise of plenty of pain to come in 2013 – might be a risk worth taking from the troika’s perspective.

This raises the prospect that the Government has been given its head, within limits, because there is an alignment of interests between the Government’s need to honour its election pledges and the troika’s need to show that austerity is not just a case of “the beatings will continue until morale improves”.