Irish News

Monday 14 July 2014

ESRI: we've turned a corner and end of austerity in sight

* Kenny vows 2014 will be year for jobs n State to contribute to Greek bailout

Published 18/12/2013|00:30

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17/12/13 Taoiseach Enda Kenny and Tanaiste, Eamon Gilmore leave a press conference leaving Minister for Finance, Michael Noonan and Minister of Public Expenditure and Reform , Brendan Howlin pictured at the launch of the Government Medium Term Economic Strategy at Government Buildings this afternoon...Picture Colin Keegan, Collins, Dublin.
Taoiseach Enda Kenny and Tanaiste, Eamon Gilmore leave a press conference leaving Minister for Finance, Michael Noonan and Minister of Public Expenditure and Reform , Brendan Howlin pictured at the launch of the Government Medium Term Economic Strategy. Photo: Collins

THE country's leading thinktank has given its most upbeat assessment since the crisis began, saying the economy has "turned the corner".

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The analysis from the Economic and Social Research Institute (ESRI) comes as the Government vowed to end austerity the year after next.

In another sign of our return to normality in the EU countries since leaving the troika programme, Ireland will now begin to contribute to the bailout for Greece.

Just 36 hours after the end of the bailout, the Coalition confirmed the country will provide financial assistance to Greece.

The Government published its own economic plan up to 2020 setting out a number of targets:

* A return to full employment with a 6pc unemployment rate.

* Replacing the 330,000 jobs lost in the crisis.

* An end to austerity the year after next.

* An end to borrowing to balance the budgets.

* A reduction in debt to average EU levels.

Launching the plan, Taoiseach Enda Kenny said 2014 would be "the year for jobs" as the Government aimed for full employment by the end of the decade.

Speaking at the launch of the Government's economic plan up to 2020, Mr Kenny said the Coalition aimed to replace all 330,000 jobs lost during the crisis with new jobs.

The Taoiseach said the plan envisaged halving the rate of unemployment to ensure there was full employment.

Mr Kenny said welfare reforms would continue to be a priority so that work paid.

Tanaiste Eamon Gilmore said after exiting the bailout there was "no question of being able to release the purse strings".

The 66-page document sets out economic policy up to the end of the decade.

Following the publication of the Medium-Term Economic Strategy, the ESRI is giving an upbeat assessment on projections for the economy, claiming recovery was under way.

The independent think-tank said the economy would grow by 2.7pc next year -- more bullish than the 2pc prediction from the Department of Finance.

The economic think-tank improved its estimate of employment growth in 2013 to 2.5pc and slashed its projection for the unemployment rate to 12pc.

Its latest winter commentary also said that domestic demand was estimated to have grown 0.9pc this year -- the first increase since the crisis began.

"The Irish economy has turned the corner," the report said.

The report also points out that employment for those with third-level education was growing rapidly, up 5.3pc between July and September of this year compared with the same period in 2012.

"It is a dramatic increase," said ESRI Professor John FitzGerald. It's lower than in the peak but it is certainly a major turnaround.

"Employment of graduates and people with university qualifications tend to earn more, they add more to productivity."

And the ESRI said it believed that employment overall would continue to grow at a "strong pace" in 2014.

It said the third-quarter figures for employment were even better than those for the previous three quarters, which also involved substantial growth.

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The ESRI also expects the Government to beat its target this year on reducing the budget deficit.

"Everybody is forecasting a turnaround in Europe, but I would like a reassurance," Mr FitzGerald said.

"The uncertainty is that if Europe doesn't recover next year, things could turn out more pessimistic than we're showing."

The think-tank reiterated its view that the Government should have had €3.1bn of tax hikes and spending cuts in the Budget, and not reduced it to €2.5bn.

But Mr FitzGerald said if the forecasts turn out to be right, then the Government could get away with no cuts in the 2015 Budget and still come in below target for the year.

"The probability of getting away with a mild 2015 Budget has increased since we published in July, but there's still a lot of things that could go wrong," Mr FitzGerald said.

The ESRI also said that it didn't view the increase in housing prices in Dublin as the re-emergence of a bubble.

"As the housing market recovers, there may be periods of sharp increases in prices over a short period," the commentary said.

 

Colm Kelpie, Fionnan Sheahan and Michael Brennan

Irish Independent

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