'Yesterday was a really, really important day' - Ireland remains focused on preparing for crash-out Brexit, Finance Minister says
Ireland remains focused on preparing for a crash-out Brexit even though hopes of a deal are rising, Finance Minister Paschal Donohoe has said.
"Yesterday was a really, really important day. The Taoiseach and the prime minister have said there is potentially a pathway to working our way through it," Minister Donohoe told the Independent News & Media Budget 2020 breakfast in the Merrion Hotel.
Minister Donohoe said that, despite Ireland facing into an election next year, he was determined in Budget 2020 to avoid the kind of giveaways typically associated with Governments seeking to stay in power.
"Few people would have thought we'd get to a fourth budget. And anybody who did think we'd get to a fourth budget certainly didn't think we were going to get to a budget like this - where the kind of things that you would normally associate with Budget Day were not in it," he said.
"That is the correct response to where we are now. ... Being careful and a bit more focused about choices now will put us in a very different place for next year."
He emphasized that Budget 2020's commitment to spending an extra €1.2bn primarily on business supports in event of a no-deal Brexit would drive Ireland unavoidably back into a deficit next year.
But Minister Donohoe said he hoped not to have to spend a penny of that plan.
He noted that the Budget 2020 script had contained a single line "in bold and underlined - 'If I don't need it, I won't borrow it'."
"Because that €1.2bn is money that we would have to borrow," he said.
If UK avoids a crash-out, he said Ireland would enter 2020 with a Government balance somewhere between €1.2bn and €1.6bn in surplus.
"If a no-deal Brexit happens, that surplus goes all the way back to nil to a fully balanced position. And then if we deploy all the contingency funding, it goes into a deficit," he said. "We'll only go there if a no-deal Brexit happens."
Minister Donohoe said that, setting aside the threat of Brexit, he was determined in Budget 2020 to avoid any steps that would overheat the economy. He said keeping Ireland on its current path of 3pc to 4pc annual growth "is the way to go", whereas spurring faster growth only creates "pent-up issues" that can end in policy U-turns.
Ireland needs an economy "that grows at a slower pace for longer," he said.
He said Budget 2020's commitment to increase capital spending by 11pc was critical and must happen even in the face of a global slowdown. He said waiting for that slowdown to happen before "pulling the lever" of increased investment would be "too late".
"One of the lessons I have from the aftermath of the last crisis period is that, if you pull back on your capital investment during a time of slower growth, all that happens is the issues and needs accumulate at the other end of that period," he said.
"In fact so many of the challenges we have - whether it be in transport, in climate change, in housing - are influenced by the fact that our public capital investment has zigzagged up and down," he said. "Then you just end up with the needs growing and your ability to respond to that level of need more and more constrained."