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Sunday 11 December 2016

Joke's on us as pot of gold is about to evaporate

Published 21/07/2016 | 02:30

Finance Minister Michael Noonan TD Photo: Gareth Chaney/Collins
Finance Minister Michael Noonan TD Photo: Gareth Chaney/Collins

Lies, damned lies, and statistics. It's a phrase we're all familiar with, but even Mark Twain would have struggled to find a better use for it than to describe 'Leprechaun Economics'.

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At first it was funny. For one thing Nobel laureate Paul Krugman was tweeting about Ireland - and it seemed like he was making a joke.

Click here to view full-size graphic
Click here to view full-size graphic

But the idea that our growth rate for last year was 26.3pc quickly became a serious problem.

Well respected news agency Bloomberg sent a dispatch around the world asking what price a developed economy would have to pay for producing such an astonishing figure.

They estimated the cost at "global ridicule" and "a renewed focus on its tax system". The 'Financial Times' took part in the mocking, leading their main story with an uncharacteristically witty intro: "The Irish have written some notable works of fiction - James Joyce and Flann O'Brien produced imperishable classics.

"Now there is a new addition to the national oeuvre - the official narrative of the country's economy." But nobody's laughing now. Least of all those of us who had hoped for a decent slice to be taken off the Universal Social Charge in October's Budget, or to see some extra money be pumped into education or housing.

When the figures were first revealed, journalists were asking the Department of Finance whether it would lead to a Budget Day windfall.

Basic economics suggests that a growing economy means more money for the Government to play around with. Admittedly that didn't work out particularly well in the wake of the Celtic Tiger

However, a week on and we discover that the phantom growth might actually cost us money.

The Department of Finance has offered assurances that the €280m extra we have to pay to fund Europe will be factored into the Budget without affecting the €1bn set aside for spending and tax cuts - but Fianna Fáil, who must help pass the Budget, say this can't be guaranteed.

It's worth bearing in mind that this takes place against a backdrop where Ireland is already at the centre of a massive EU probe into whether technology giant Apple was given a special tax deal. If the EU finds against the company in the coming months, billions of unwanted money will roll into Michael Noonan's coffers and the world will again wonder what kind of a Republic we're running.

That pot of gold could have serious ramifications for jobs.

And then there is Brexit to factor in. The UK is the second biggest contributor to the EU, meaning that when they leave in the next couple of years, our bill will rise again.

The truth hurts because while statistics are flexible, facts are stubborn.

Irish Independent

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