Exiting the Troika’s bailout programme at the end of this year will be the biggest event to hit our economy since we signed up to receive the funds, and Minister for Finance Michael Noonan is already busy planning what will come after - and it looks like more of the same.
One would have thought that no more Troika might mean no more overwhelming financial planning and tying ourselves down to strict future targets, but The Irish Times reports today on Mr Noonan’s intention to introduce a “stringent” economic plan what will carry us from 2014 to 2020.
The plan will be put together between his own Department of Finance and Minister Brendan Howlin’s Department of Public Expenditure and Reform, with the Dáil select sub-committee on finance being informed on the progress so far.
Three-year expenditure ceilings are planned to be introduced, and some individual departments have already been informed of the sort of cuts they will be expected to introduce, with Social Protection expenditure look set to be cut by 3%.
One vital part of this plan is that it will be carried over through the next General Election in 2016, and unlike with the Trokia’s bailout programme, a future non-Fine Gael or Labour government will not be bound to anything.
However, DCU financial economist Dr Michael Dowling says that although the Troika has been largely positive with Ireland’s progress, he believes this current government will find it hard to stomach their own medicine over the next few years.
“Historically, the emphasis of any sort of stringent economic plans have been on the first few years after an election, so as we get closer to the parties being re-elected that we will see quite an element of softening of any proposed cuts.
“That’s probably going to be the main focus of the next few years, seeing as we’ll be our own bosses.”
Dr Dowling says that we’ve still “a long way to go” in terms of doing more than just balancing the books, and that meaningful measures need to be introduced that address structural problems.
new jPlayerPlaylist({ jPlayer: '#185751369665468', cssSelectorAncestor: '#jp_container_185751369665468' }, [ { title:'DCUs Michael Dowling on structural budget reform', mp3:'http://cdn.radiocms.net/media/001/audio/000001/18575_media_player_audio_file.mp3'
} ], { swfPath: '/assets/includes/js/jPlayer', supplied: 'mp3', wmode: 'window', solution: 'flash, html' });
As well as this, economist Constantin Gurdgiev notes that this idea of long-term plan for the economy is not anything new, as most governments introduce far-reaching blueprints.
new jPlayerPlaylist({ jPlayer: '#185771369665468', cssSelectorAncestor: '#jp_container_185771369665468' }, [ { title:'Constantin Gurdgiev on long-term government budgets', mp3:'http://cdn.radiocms.net/media/001/audio/000001/18577_media_player_audio_file.mp3'
} ], { swfPath: '/assets/includes/js/jPlayer', supplied: 'mp3', wmode: 'window', solution: 'flash, html' });
Although Constantin isn't sure if they can, he believes that if Ministers Howlin and Noonan can put together a plan which addressed the “bottlenecks that we’re facing with our economy”, with meaningful structural reforms and less of a focus on fiscal discipline, future goverments may take it onboard.
“This is much longer term, and much more painful primarily because the reforms that this government and previous government promised the IMF have not really been delivered.
“We’ve delivered on fiscal reforms, such as cuts and increases on taxes, but we haven’t on productivity enhancement. We also haven’t changed the structure of the market to address the state-controlled monopolies in energy, transportation and insurance sectors.”
With Fianna Fáil gaining in the polls once again, Minister Noonan could have to tread carefully with what he plans for future budgets.
