Tuesday, November 25, 2014

25/11/2014: Irish Fiscal Council: More of Troika Speak, Less of Original Insight

The Irish Fiscal Advisory Council [an independent body of sort with some relevance of sorts, if only as a 'check' on the Government] has issued its assessment of the fiscal situation in Ireland. Just in time after the Troika review. Unsurprisingly, the Council mirrors the IMF (and the Troika analysis - covered here: http://trueeconomics.blogspot.ru/2014/11/21112014-latest-troika-report-risks-no.html.

Per Council:
"The Government will likely accomplish the important milestone of reducing the deficit to below the 3 per cent ceiling in 2015. The debt to GDP ratio is beginning to fall, albeit from a very high level. At the same time, economic recovery appears to be taking hold and risks to the Government’s balance sheet have subsided considerably as the outlook for both NAMA and the banking sector has improved." They wouldn't notice that debt/GDP ratio and deficit/GDP ratio were both helped quite a bit by the switch to new National Accounts classification in 2014. See Eurostat data here: http://trueeconomics.blogspot.ru/2014/10/21102014-of-statistics-ireland-and.html. Then again, Troika too 'missed' that point, so predictably, everything is down to the miracles of growth (see: http://trueeconomics.blogspot.ru/2014/11/23112014-half-of-irish-growth-miracle.html).

The Council shows some teeth, however, pointing the obvious: "…Budget 2015 reflects a missed opportunity to move the public finances more decisively into a zone of safety by following through on previous plans. The deficit is projected to be more than one percentage point higher in 2015 than could have been achieved if previous plans had been implemented. All else being equal, the larger deficits result in the debt level being roughly €10 billion higher in 2018 than if previous plans had been adopted."

And then there is the risk of pro-cyclicality - the new boggeyman  of European fiscal policy. In this context, "…Budget 2015 was marked by an absence of a well-specified plan for the public finances beyond 2015. Published tax revenue projections assume no change in policy despite Budget commitments to lower taxes in the coming years. Moreover, the Budget spending profiles assume unchanged expenditure after 2015, despite higher figures being set out in the Comprehensive Review of Expenditure 2015-2017 (CER 2015-2017). Expenditure ceilings have been raised again, however, the CER 2015-2017 does not adequately address how well-known expenditure pressures will be accommodated in the coming years."

Oh dear, that stuff is almost entirely Troika-speak and hardly much new. All in, this makes the Fiscal Council report if not outright redundant, at least repetitive. Which might be the point of the exercise, to keep the pressure on in hope that politically-expedient boom and bust spending and tax cutting are not making a return in Ireland ca 2015.

Good luck to all ye, hoping.

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