Wednesday 28 September 2016

Plunge in personal spending is 'like Great Depression'

Published 31/01/2013 | 05:00

IRELAND has suffered the fastest and largest fall in personal spending of any of the crisis-hit countries in Europe.

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The Economic and Social Research Institute (ESRI) said the collapse is comparable to what happened during the Great Depression in the US.

It also warned that the economy would grow at a slower rate this year than previously thought because of global economic difficulties.

"The fall in personal per-capita consumption in Ireland during the crisis has thus far outstripped anything seen amongst the non-crisis nations of Europe and has, given available data, constituted the largest and fastest fall among the crisis nations," the ESRI report said.

"In fact, historically, the consumption collapse in Ireland is comparable to that experienced by the United States during the Great Depression."

The report said that the decline in consumption here was the most rapid experienced by the crisis states – Greece, Portugal, Spain, Italy and Ireland – and beyond anything experienced in the non-crisis states of Germany, France, Austria, Netherlands and Finland.

In a separate ESRI economic commentary, the think tank heaped pressure on the Government and the public sector unions to come up with significant gains in the renegotiation of the Croke Park Agreement to help allow the State meet its bailout targets for next year.

It said public sector pay remains relatively high compared with the private sector. The think tank said extension of the agreement represented an attempt to tackle the pay issue.

"As we understand it, the proposals encompass pay cuts, longer working hours, changing increments, a cut in overtime rates, and changes in work practices," the commentary said.

The reported proposals would go a long way to dealing with payroll cuts and increase the work load of staff.

But the ESRI warned that it was particularly important to control pay in the health service.

"Hospitals do not have the option of turning away seriously ill people," the winter commentary said.

"Where payroll costs are managed through delaying procedures for non-life threatening illness, the consequence are borne by those requiring treatment.

"Without adjustment in the public sector, it is difficult to see how the spending targets can be met without a major cost in terms of service reduction."

The report predicted that the economy would grow at 1.3pc this year, down from a previous estimate of 2.1pc in the institute's autumn commentary. But it will increase to 2.3pc in 2014, it forecast.

Unemployment is estimated at 14.6pc this year, and 14.3pc next year. However, the ESRI said the decline would be due to emigration.

See Business Week supplement

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