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Ireland needs a stronger US recovery or a much bigger stimulus plan

Donal O'Donovan


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Stimulus: Jerome Powell

Stimulus: Jerome Powell

Bloomberg

Stimulus: Jerome Powell

A US economic slowdown is bad news for Ireland, and could leave our own stimulus package looking threadbare.

Its not a surprise that the US economy came to a screeching halt in April.

The scale of the hit has surprised markets - particularly because the trend for US jobs has swung back into reverse.

The US economy needs a shot in the arm, but with an election coming in November, Donald Trump's divisive - and successful - campaign tactics mean the chances of Washington agreeing an economy-boosting financial stimulus plan before that looks pretty remote - he'd need to work with opposition Democrats for that.

The Fed's Jerome Powell has called for more US fiscal support. Without a big stimulus bang to get America back to work, Ireland's economy will be slower coming out of the crisis.

It was US investment that pulled Ireland into a belated recovery after the last crash, remember.

In fact, in many ways our July Stimulus Package looks like a holding scheme, to keep Ireland ticking over until a global economy - inevitably US-led - kicks into gear.

Ministers here might claim ours is a €7bn package, but strip out €2bn of loan guarantees that might never be used, and discount, for example, the extent the Pandemic Unemployment Payment repackages social welfare spending that would have happened even without the scheme and our stimulus looks anaemic compared to the €10bn of spend the Fiscal Advisory Council, for instance, indicated we need.

That makes sense if ministers think a global lift will boost Ireland's recovery. But if the US economic cavalry is not coming, the budget in October will have to ramp up our own firepower, or we risk a more painful recession next year.

Irish Independent