On Thursday, Paschal Donohoe addressed the Budget Oversight Committee of Dáil Eireann about the measures which will be presented a week on Tuesday. He said: "What we will need to do is to demonstrate that - once the worst of the pandemic has passed - we are committed to balancing the books over the medium term. This can be done in a timely manner, consistent with the dual needs of supporting the economy as well as ensuring fiscal sustainability".
Since the Government has been able to borrow at zero or negligible interest rates, and has had no difficulty in selling government debt, the impression has been created that heavy borrowing can continue indefinitely.
Not just opposition politicians and lobbyists, but even some economic commentators have been urging spending programmes which would have been deemed unaffordable prior to the Covid downturn.
It does not make sense that the country is in any way better off after an unexpected hit which has caused economic activity to drop 7pc and unemployment to treble. Donohoe must expect the easy money period to be temporary.
He went on: "A key challenge in framing the Budget is to find the appropriate balance between continued support for the economy and staying 'within the pack' of EU member states. As we are all too aware in this country, market sentiment can turn rapidly - so we must not be an outlier. Irish public debt is already one of the highest in the developed world at 125pc of national income."
Ireland unfortunately is not 'within the pack' of euro- zone members as regards budget sustainability; it is one of the most indebted members, the legacy of the banking bust. If interest rates return to more normal levels, Ireland's debt service burden would rise as maturing debt was replaced with more expensive borrowing. It takes quite a while for this to happen since most of the debt is at fixed rates for long periods, but the markets would know in advance that strains were bound to emerge and might decline to lend. This is what happened back in 2010 - and Donohoe has not forgotten.
The eurozone has a policy, called the Stability and Growth Pact (SGP), which places a ceiling on deficits. The ceiling has been suspended because of the pandemic and the European Central Bank has been buying up the avalanche of new government bonds being issued throughout the zone.
It is official policy to let each member borrow what they must. Expand the debt and if the markets are reluctant to buy, the central bank in Frankfurt will help to plug the gap. This policy will last until the Covid emergency is deemed to have passed, at which point one of two things will happen. There will be a resumption of inflation consequent on the monetary expansion, easing the real burden on debtor countries but a stealth tax on creditors, or the low-inflation targets will be respected through a restoration of tighter budget limits and an end to central bank bond-buying. The latter is the more likely.
Donohoe's reference to staying 'within the pack' is astute. A country without its own currency cannot engage in traditional wartime finance (let the central bank fund the government at low interest and worry about the consequences later) because it does not have a central bank. Only the ECB in Frankfurt can support government credit and will eventually cease to do so unless the inflation target is abandoned.
The country to watch is France, where the virus has not been well controlled. Last week, the French government announced its fiscal plans and will cut the deficit next year from €206bn to €153bn, with the intention to move back towards balance in 2022 and 2023. Borrowing in France has not reached the proportion of national income likely in Ireland this year. The French government will borrow just over €3,000 per citizen this year versus about €5,000 in Ireland.
Whenever France gets within sight of the SGP limits, they will support Germany's predictable desire to reimpose budget discipline and to end the balance sheet explosion in Frankfurt.
The Italian finance ministry has adopted a formal target of returning to the SGP deficit limit by 2023 and might even manage it, since Italy has contained the Covid resurgence better than France - as has Greece, the most indebted eurozone member. Of the more indebted countries, the weakest performer has been Spain where the virus response has been weakened by political rows between central and local governments.
In an address to the Construction Industry Federation on Thursday, the secretary-general of the Department of Public Expenditure, Robert Watt, echoed recent remarks from his boss, minister Michael McGrath, in defence of the public capital programme. Watt must feel that the fiscal adjustment last time round, after the 2008 crash, cut the capital programme too severely and that the same mistake should be avoided on this occasion.
But with the Government unwilling to raise taxes under various headings, as was done post the 2008 crash, the combination with a sustained capital programme implies tight control, once the crisis passes, on current spending. The remarks from Watt and from his minister should be interpreted as a signal that battle will soon be joined with the proponents of permanent increases in current spending, no willingness to match them with rising tax impositions and the inevitable outcome, another assault on the capital programme.
To hide in the pack and emerge with unimpaired capacity to roll over sizeable quantities of maturing debt for decades to come requires that Ireland commit, as other eurozone members are doing, to an early return towards budget balance.
The 2021 Budget statement is a chance to indicate the direction of travel and to challenge the soft-option brigade who have enjoyed a free run over the summer. Only countries with their own currencies can opt unilaterally for wartime finance. That ship sailed on January 1, 1999, when Ireland joined the eurozone.