Paschal Donohoe hints that cost of living supports to be cut back

Minister for Public Expenditure Paschal Donohoe Photo: Gareth Chaney/Collins Photos

John Downing

Supports for people suffering from the ongoing price increases are set to be cut back, Public Expenditure Minister Paschal Donohoe has strongly hinted.

Mr Donohoe, as chair of the 20 nations in the Eurogroup, today joined European Central Bank governor, Christine Lagarde, in briefing EU leaders at their Brussels summit on the current economic difficulties.

The move follows serious bank turmoil in the USA and in Switzerland.

Mr Donohoe told reporters that he believed finance ministers must curb cost of living supports in response to the changing global economic picture.

He said some income supports can continue but these must be targeted at the most vulnerable people living in poverty.

The Minister said phasing out fuel excise cuts in Ireland is part of the policy shift and he warned that too much government supports risk worsening inflation by driving up the price of services and food.

“Budgetary policy in the euro area has to change,” Mr Donohoe told reporters as he arrived to brief the 27 heads of EU government.

“We are in a difficult moment, the consequences of the war and inflation could be with us for some time. We need to ensure that measures that we have in place are affordable, but also sustainable,” the Public Expenditure Minister said.

Asked what this meant for cost of living supports in Ireland, Mr Donohoe said it was important that the Government had already agreed a way to end fuel excise cuts.

“If we’re in an environment in which the cost of energy has come down, and we think it has come down between now and the approaching winter, that the level of energy support has to change too,” he said.

He reiterated that Ireland would have no additional energy credits this year, while next autumn’s Budget will outline what supports will be in place for next winter.

The collapse of a series of banks in the United States and an emergency rescue of Credit Suisse has alarmed European leaders, who have been at pains to insist that the EU banking system is stronger than it was in the last global economic crisis of 2007-2008.

But as euro zone leaders gathered on Friday morning to discuss the economic picture, they were required to leave their phones outside the room to prevent leaks that might move financial markets, underscoring the seriousness with which the matter is viewed.