There will be a lot of attention on the latest EU Commission forecasts that Ireland will be the fastest growing economy in the euro zone next year. In other positive news, the Exchequer returns show that taxes continue to run ahead of target, increasing confidence that the sums underlying the Government’s budget for 2015 will be sound. However the most important development yesterday was the raising of €3.75 billion by the National Treasury Management Agency in new 15 year borrowings, at a cost of less than 2.5 per cent. This will allow more expensive IMF borrowings to be paid down early, delivering a real long-term financial benefit to the State. It is vital that we fight to retain our ability to borrow money at these kind of rates for as long as possible.
The lift in economic growth has, as the EU Commission said yesterday, been surprising in its scale. Together with the official tax figures published yesterday, this does indicate that there is a recovery under way in the economy and that it is fairly broadly based. The Government needs to have two priorities here. One is that it must do whatever it can to foster the recovery. There are remaining blockages in the economy which State policy can help to fix – such as the provision of finance to small business, the need to accelerate housebuilding and so on. But a key issue is not to undermine confidence. In this regard the bungled introduction of water charges may well be one of the factors that has hit consumer sentiment.
The second priority is to fight to retain the confidence of international investors, enabling us to continue to borrow money at a low interest rates. This requires the Government to continue to deliver on its financial targets. Here again the water saga raises its head. Whatever solution is found cannot be one that upsets the budget arithmetic and requires a higher EU deficit figure for next year. In responding to the latest controversy, ministers must realise that there is work to be done to bed down the recovery and complete the work of fixing the public finances. We are not there yet.