Employers group Ibec joins calls for easing of austerity

Group says there should be no new taxes in next budget but public sector pay cuts should be pursued

The employers group Ibec has added its voice to those calling for an easing up on austerity, urging the Government to abandon plans to raise a further €500 million in tax in this year’s budget.

However, the business group said that public sector pay cuts should be pursued.

In its latest Quarterly Economic Outlook , Ibec has called on the Government to ease its planned budgetary adjustments for this year. It argues the promissory note deal and the extension of the repayment period on some loans has given the Government some room for manoeuvre .

Ibec chief executive Danny McCoy said households needed to be told that 85 per cent of the work in closing the public deficit has been done and that there was an opportunity now to do a bit more spending. "We have reached a point in the cycle where we can take the foot off the brakes a bit."


He stressed that while the view outlined in Ibec's latest quarterly economic outlook may "rhyme" with comments made recently by President Michael D Higgins, it was not making the same point as President Higgins made in his Financial Times interview.

“We are saying we need to keep hitting the targets [for the reduction in the public deficit],” Mr McCoy said. “But we believe we can hit the targets without an additional €500 million in taxation measures in the next budget.”

Ibec argues that by abandoning the projected tax increases for this year, Ireland could still reach a budget deficit of about 4.5 per cent, well below the 5.1 per cent target. It says 2012’s budget deficit of 7.16 per cent was well ahead of the 8.6 per cent target.

The Government plans a further €1.5 billion in fiscal adjustments in the next budget, of which one-third are to come from additional taxation measures, and the rest from reduced public expenditure.

Mr McCoy said what was needed now was a boost to the economy so that Ireland could “finish off its austerity programme”, noting that first quarter consumer spending figures were disappointing. The general European economy was stalling and “we don’t want to send the Irish economy into recession.”

Government objective
Speaking after a meeting in Brussels, where progress was made on a deepening political impasse on the European Union's seven-year budget, Tánaiste Eamon Gilmore said the objective of the Government has always been to bring about a set of circumstances where the budget adjustment will come to an end. "We've 85 per cent of the budget adjustment completed. We have to complete that but we also have to look at Ireland post-recession," he said.

Concern about the euro zone’s economic response to the crisis has emerged in recent weeks, spurred by comments from European commission president, Jose Manuel Barroso, that austerity may have reached its limits.

However, senior EU officials have stressed that countries still need to tackle excessive budget deficits. Speaking after last week’s decision to cut interest rates, ECB president Mario Draghi said that countries should not “unravel” the progress made in reducing their borrowing needs.

EU economics and monetary affairs commissioner Olli Rehn has also said countries needed to sustain fiscal consolidation measures, despite indicating that countries, such as France, could be given extra time to meet their targets for deficit reduction.

Colm Keena

Colm Keena

Colm Keena is an Irish Times journalist. He was previously legal-affairs correspondent and public-affairs correspondent

Suzanne Lynch

Suzanne Lynch

Suzanne Lynch, a former Irish Times journalist, was Washington correspondent and, before that, Europe correspondent