Ireland needs to step its job and company supports and to push ahead with capital investment plans otherwise there is a risk that more firms will fail and unemployment will rise sharply, the European Commission said in its annual assessment.
The economic policy recommendations, which were compiled as the coronavirus shock swept across Europe, also noted that the pandemic had piled pressure on the State’s already overburdened health system and exposed the weaknesses of the lack of universal healthcare here.
Even though the Government has introduced a raft of income support spending as well as measures to keep companies alive during the lockdown and beyond, the Commission warned that the “risk of significant output loss, bankruptcies and insolvencies, and an increase in unemployment and people at risk of poverty, remain high”.
“The government has made significant use of income and employment support policy to respond to the pandemic, notably short-time work schemes, which should continue to be swiftly implemented and enhanced,” it said.
Minister for Finance Paschal Donohoe has said the Government is looking at cutting payments made under the Pandemic Unemployment Programme that pays a flat rate €350 a week, but that it might consider extending a wage subsidy scheme.
At present more than a million people, or around half the workforce, are in some way dependent on the State for at least part of their income.
The Government has also warned that budget deficits are not sustainable and that the debt has to paid off, even though the cost of State borrowing is close to zero and well below the economic growth rates of recent years and that expected next year when the pandemic has passed.
“To foster the economic recovery, it will be important to front-load mature public investment projects and promote private investment, including through relevant reforms,” the Commission said.
“The restart of the economy requires that Ireland advances on its ambitious environmental, climate, energy and infrastructure investments,” it said.
The State has one of the worst records in Europe when it comes to tackling emissions and the issue is a key factor in Government formation that now involve the Green Party which is committed to reducing carbon emissions by 7pc a year.
So far, Government has been slow to introduce a meaningful rate for carbon taxes and unless agriculture is pushed to adapt to a green agenda, the country will make little progress on emissions.
“Greenhouse gas emissions in transport and buildings are high and have remained on a rising trend,” the Commission said.
There was also a warning over tax rules here that the Commission said allowed companies to engage in aggressive tax planning.
Despite the tiny size of the economy here relative to the bloc as a whole, EU-wide economic statistics are often heavily distorted by the shifting for tax reasons of tens of billions of euro of intellectual property assets by the likes of Microsoft and Apple to Ireland.
“The effectiveness of the national measures will have to be assessed,” the report said.