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EU target could spell disaster

THE Government's economic think-tank has warned that an EU requirement that Ireland impose a package of budgetary cuts and taxes of €15bn over just four years is unrealistic and could spell disaster.

The Economic and Social Research Institute says, in effect, that the Government would better serve the people by ignoring EU strictures and extending its recovery schedule by two years.

It concedes that this is unlikely to happen, but the logical scenario it paints, if targets remain as they are, is chillingly credible.

Rather than thumbing its nose at the European Commission, the Government might concede that the decision is the Commission's to make, but could suggest that it take another look at the Irish situation.

As an ESRI economist said last night: "There's nothing magical about 2014. It's an arbitrary date."

The ideal time for an austerity programme -- if the word ideal may be used in such a context -- is when a country's trading partners are going through good times and there is a demand for its exports. That is patently not the case now. Austerity is the dish of the day, ordered by the European Commission in the eurozone and followed by most world economies, including the UK. It is a dish preferably served cold, like revenge.

The Irish cannot control what goes on elsewhere and cannot, themselves, amend at a stroke a recovery plan that has been endorsed by the commission. The December Budget and four-year plan must be approved by the commission.

However, if the choice lies between attempting to meet the target of a 3pc deficit by 2014, which now seems nigh impossible, and wrecking the Irish economy, the commission would be wise to review the Irish situation in light of our newly revealed €15bn black hole. The ESRI warns that attempts to meet current targets to reduce spending could stifle growth and accelerate unemployment to the extent that Ireland would face a "lost decade" with one in 10 people unemployed.

Surely it would be preferable to set a realistic target, rather than tilt at windmills for a year or two and then have to either change the plan or allow an EU member economy to collapse. That is no way to run a union of nations.

Irish Independent