Update: Debt Reduction – Finance 2nd October, 2014

QUESTION NO:  9
DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)
by Deputy Bernard J. Durkan
for ORAL ANSWER on 02/10/2014 

 To ask the Minister for Finance the progress year on year over the past five years towards achieving a stabilised economy, reduced borrowed, debt reduction; the extent to which the consumer has benefitted or may expect to benefit from the progress to date; and if he will make a statement on the matter.
 
REPLY.

Following the crash of the credit-fuelled property bubble, together with the accompanying financial crisis, Ireland’s economy experienced a sharp downturn with a loss of almost 10 per cent in real output between 2008 and 2012.  Immediately following the crash, a major gap in the public finances emerged.

Through the implementation of substantial adjustment, significant progress has been made in restoring financial stability, fiscal stability and economic growth.  The economy and the public finances are now on a more stable footing.

Ireland’s competitiveness has significantly improved in recent years.  Relatively low consumer price inflation over the last five years has meant that Irish price levels have fallen considerably relative to the euro area.  For instance, annual HICP inflation in Ireland has been below that of the euro area average for every year since 2008. This trend continued into the early part of this year, with inflation  over the first six months of the year coming in below the comparable rate in the euro area.

Following a major restructuring and recapitalisation of the banking system, stability in the financial sector has been restored.  The Government recognises that the availability of finance is an essential prerequisite to supporting growth and employment in the economy. In this regard, the Government has taken a number of actions to assist in the financing of the economy through new and innovative products.

The underlying problems of the public finances are being addressed. The policy measures implemented by the Government have resulted in a decline in the deficit.  This decline has been gradual and in a phased manner, consistent with the dual needs of supporting economic activity as well as repairing the public finances.  All of the interim deficit ceilings that were set have been met and Ireland is firmly on track to achieve a deficit of below 3 per cent next year.  This has been important in restoring Ireland’s credibility.  In addition, the debt-to-GDP ratio is estimated to have peaked and is now on a firm downward trajectory.

The immediate fiscal policy objective remains the achievement a deficit of less than 3 per cent of GDP by next year, thereby correcting the excessive deficit. Thereafter, fiscal policy will be set in line with the requirement to move towards Ireland’s medium-term budgetary objective, which is for a balanced budget in structural terms. 

The policies the Government has implemented to correct the public finances, to improve competitiveness and to stabilise the banking system are now bearing fruit.

The economy is growing and – importantly – there are clear signs that domestic demand has stabilised and is expected to make a positive contribution to economic growth this year.  Consumer spending is growing once again, which is positive.

The Government remains focused on maintaining the reform momentum to achieve the goals of creating more jobs, enhancing living standards and, ultimately, achieving full employment.  As set out in its Statement of Government Priorities 2014-2016, the Government is prioritising the actions needed to build on the economic recovery that is already underway to ensure that the benefits of the recovery are felt by everyone across the country.