Now 'Leprechaun Economics' puts Budget spending at risk
The €1bn that was predicted to be available for spending hikes and tax cuts in the next budget has been placed under serious threat by 'Leprechaun Economics'.
The apparent dramatic surge in Ireland's growth has caused our contribution to the running of the European Union to be bumped up by a further €280m for next year.
The Central Statistics Office revealed last week that the Irish economy grew by 26.3pc in 2015 - more than three times the original estimate.
Experts dismissed the massive revision as "Leprechaun Economics" and a "farce" as it relates to the activities of Ireland's complex multinational sector.
The Department of Finance has insisted that the larger EU bill will not reduce the amount of money available for Budget 2017.
However, Fianna Fáil's finance spokesman Michael McGrath told the Irish Independent: "This is real cash which is going to have to found and paid in 2017.
"It's going to have to be accounted for in the budget for next year."
The colossal increase in GDP does not accurately reflect what is happening in the Irish economy. It was due in part to some very large foreign companies reinventing themselves as Irish companies to benefit from our low corporation tax rate.
"We've reported extraordinary growth but we're not getting the benefits in terms of employment. It's a false economy," he said.
"It's not in any sense real but it will have a real effect on our pockets," Mr McGrath said.
Finance Minister Michael Noonan has already indicated that October's Budget will be based on growth of around 5pc, as the revised figure provoked a bemused international reaction.
But as the figure pushes up the value of the Irish economy, at least on paper, then the amount of money we must contribute to the EU Budget also rises.
Mr Noonan said the increase is around €380m, but added that "mitigating factors" meant it would actually be around €280m higher than what had been previously estimated.
"We currently estimate the impact of the Central Statistics Office revision on our EU Budget contribution for 2017 at about €380m," Mr Noonan said.
"However, other mitigating factors mean the overall increase in the EU budget contribution is now estimated to be in the order of €280m, when compared with the forecast underlying the Summer Economic Statement.
"It must be emphasised that the final impact depends on a number of variables, including the size of the overall EU budget for 2017 (which is not due to be agreed until November 2016) ... and other EU budget developments."
Mr McGrath said it is possible that the so-called 'fiscal space' available on Budget Day will remain at €1bn - but this will depend on the economy outperforming expectations.
"It's possible that corporation tax will outperform estimates and that would cover the extra liability without an impact on the Budget.
"I think it will take some time yet for the possible implications to become clear."
Large purchases by aircraft-leasing firms based here were also a factor.
There was also a massive jump in net exports, due largely to the fact that multinationals here contracted companies overseas to do work.
But some booked it through their operations in Ireland, even though no economic activity was taking place here. "It's a real sting in the tail from the GDP figures. As well as reputational damage, it's hitting us in the pocket," Mr McGrath said.