Bond markets could turn on Ireland with speed despite the current European Central Bank (ECB) supports and the ease for now of access to cheap debt, Paschal Donohoe warned yesterday.
He made the comments at an online seminar organised by the UCD Geary Institute for Public Policy - amid growing fears that emergency supports to the economy will have to be extended, potentially well beyond an initial cut-off date of June 12.
In heavily couched language, the minister raised the prospect of so-called 'bond market vigilantes' driving up borrowing costs for the State if investors baulk at the sharp rise in the deficit and national debt now under way.
Bond markets were more likely to be a check on spending than constraints under Europe's post-crash budget rules, he said.
"At some point in dealing with all of this a budget constraint will emerge again.
"I have views regarding the timing of it, the level of it, as we work through this that is more likely to emerge from what happens within the financial markets than from the fiscal architecture we are anchored in within the euro area," Mr Donohoe said.
"At a point in time and potentially with speed that budget constraint will re-emerge."
This week, the State's own estimate for how much will be borrowed this year was hiked from a €10bn-to-€14bn range to a €20bn-to-€24bn range by the National Treasury Management Agency (NTMA), although it was comfortably able to borrow €6bn on the bond market this month at an interest rate of well under half-of-one-percent.
On the same panel, economist Barra Roantree of the ESRI warned of a potential backlash at any move to row back on the unprecedented wage supports currently available for people whose jobs have been lost as result of the crisis.
Almost a third of private sector workers are now receiving the new €350-a-week Pandemic Unemployment Payment (PUP), he said.
Any move to cut the level of support risked provoking a public backlash and even protests, Dr Roantree warned.
The emergency scheme for people whose jobs cannot be done as a result of the Covid-19 lockdown is due to end on June 12 after an initial 12-week period. It compares with €203 a week standard jobseeker's benefit.
The payment, along with a fuel allowance extension, has massively cushioned the impact of the crisis, but in a significant number of cases has left low-paid workers better off than they were in work.
Taoiseach Leo Varadkar said yesterday that the payment and social welfare schemes for people who lost jobs before, during and after the coronavirus crisis would ultimately have to be brought together.
Dr Roantree said that with little prospect of an immediate or permanent return to work for hundreds of thousands of people, then wage support schemes should be redesigned to avoid so-called 'cliff edges' that leave people who go back into work worse off - including once childcare costs are factored in, or simply disincentivises people going back to work.
Wage supports may need to be modified to reflect the different needs of groups including renters and people with children, he said.
He warned, however, that changing the supports would be difficult - including because they are "generous and they are important".
"Getting it right is important for not inducing widespread protest," he said.
Meanwhile, on radio yesterday, Social Protection Minister Regina Doherty warned that wage supports cannot be kept at the same level indefinitely.
Numbers availing of the PUP stood at 584,000 earlier this week, but are likely to have risen since.
Around €4.5bn has been allocated to cover this and other coronavirus-related social welfare benefits.
Asked on RTÉ Radio how long the Covid-19 Pandemic Payment scheme can go on, she replied: "That's as long as a piece of string.
"What we can't do is sustain it at the level that it's at indefinitely."
But she said that so far the payments were "nowhere near" using up the €4.5bn allocated. She sought to offer reassurance to people on the payment, saying: "Our social welfare system and support were here long before the pandemic and they will be here long after the pandemic."
She said it was originally planned that when someone sought the Covid-19 PUP they would be asked to apply for jobseeker's schemes.
Ms Doherty said someone on the Covid-19 PUP who has an adult dependent or children could receive more than €350 a week if they were moved onto jobseeker's benefit.
"What we need to do is transition people away from the PUP onto jobseeker's payments and to sustain their income," she said.
As to when that would happen she said it was "a decision that the recovery team needs to make and it very much depends on NPHET [National Public Emergency Team] to decide which businesses can open, if any, in the next number of weeks and then we can provide a roadmap".