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Government must borrow to strengthen society

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Finance Minister Paschal Donohoe. Photo: Steve Humphreys

Finance Minister Paschal Donohoe. Photo: Steve Humphreys

Finance Minister Paschal Donohoe. Photo: Steve Humphreys

In fixing broken economies you are better off concentrating on needs first and wants later. Right now workers, businesses and households require help on a scale no contingency allows for.

It is misguided to think we have been here before - we haven't. Never have so many been dependent on the State so suddenly, nor our health service so stretched.

In all other financial crises responses were framed purely in economic terms; managing our way out of lockdown must be done through the broader prism of social responsibility.

To be successful it must be inclusive and not prioritise one sector while sacrificing the prospects of the wider public.

The promotion of private interests over community led to a fracturing of trust responsible for the fragmentation of our political landscape.

The strategies used by the generals in the last economic war - namely austerity and the socialisation of private debt - drove us deeper into recession.

This time a turbo-charged economy was switched off. But old wounds still run deep; spending freezes and tax cuts have a chilling effect.

Stimulating demand will require imagination and ingenuity. Measures that might once again incubate zombie economies across the EU must be resisted.

What was wrong a decade ago would be catastrophic and inexcusable today.

Nevertheless the latest Consumer Confidence Index reveals 86pc of those questioned believe austerity measures will be introduced by the next government. Fears which will have been bolstered by last week's comments by Finance Minister Paschal Donohoe to Fine Gael colleagues.

He warned of a deficit of €30bn by the end of the year if recovery from the Covid-19 crisis is not as quick as expected.

With the economy at a full stop a further slowdown is hardly going to be the answer.

Coronavirus lockdowns have pushed the European economy to the brink of recession.

Brussels is discussing plans to give trillions of euro in financial support to struggling members, using the EU's seven-year budget and special recovery instruments.

But member states must also unleash capital investment. The midst of a pandemic is not the time to worry about a spiralling deficit.

All major governments are running unprecedented deficits. In fact, the cost of borrowing has fallen further during this crisis.

The greater risk is an unnecessary shift to austerity that snuffs out any prospect of an economic recovery. Concerns about the scale of borrowing are understandable, the figures involved are eye watering. But thousands of businesses have no revenues. It really is a case of go large or go down.

Eventually, tax rises will be needed as they always will. Yet such increases will have to be pushed out to the medium-term. For now, the Government should put aside worries over the level of debt and continue to provide the support our society and economy so vitally need.

Irish Independent