EU set to give Ireland until 2014 to meet its budget deficit target

RealityCheck

http://www.irishtimes.com/newspaper/frontpage/2009/1110/1224258483106.html?digest=1

wrote:

But the commissioner will also say that the deterioration in the State’s economic performance since the start of the year – due to weakening tax receipts and higher social welfare spending – is such that the Government should now be given until 2014 to reduce the budget deficit to a sustainable level.
Informed sources suggested the Government did not seek the extension, which follows a routine review by the commission under the excessive deficit procedures of the EU’s Stability and Growth Pact.
The one-year extension is in line with the parameters of the pact, under which euro zone members are obliged to keep their budget deficit within 3 per cent of gross domestic product.
Some other countries are likely to receive a similar extension tomorrow following similar case-by-case reviews, while the excessive deficit procedure may also be initiated in respect of France, Spain and Britain.
A new EU forecast last week projected that Ireland’s deficit will rise to 14.7 per cent in 2010, among the highest in the euro zone and the wider EU, from 12.5 per cent this year and 7.2 per cent in 2008.

Looks as though we require an extra year to get our public finances in order. This is not due to any sympathy on the part of the European Commission but due to the continuing deterioration of our public finances.

We now face the prospect of massive cutbacks for at least the next five years. You just never know,maybe the unions will get there wish of extending the adjustment to 2017:rolleyes:.

If we are struggling to make the necessary cutbacks this year, it begs the question how do we do it for the next five years without serious social problems among others? Is it a case of being damned if we do and damned if we dont?

Tipp Man

RealityCheck wrote: »

http://www.irishtimes.com/newspaper/frontpage/2009/1110/1224258483106.html?digest=1





Looks as though we require an extra year to get our public finances in order. This is not due to any sympathy on the part of the European Commission but due to the continuing deterioration of our public finances.

We now face the prospect of massive cutbacks for at least the next five years. You just never know,maybe the unions will get there wish of extending the adjustment to 2017:rolleyes:.

If we are struggling to make the necessary cutbacks this year, it begs the question how do we do it for the next five years without serious social problems among others? Is it a case of being damned if we do and damned if we dont?

This is only the start of the mess for Ireland, its going to get worse before it gets better. Where are all the cuts for 2010 to 2012 going to come from??

Riskymove

Tipp Man wrote: »

This is only the start of the mess for Ireland, its going to get worse before it gets better. Where are all the cuts for 2010 to 2012 going to come from??

this is a very important point that people are overlooking

look at all the messing about over the cuts for next year.....its only the beginning........cuts and taxes are both going to be the order of the day for the next 3 budgets

ei.sdraob

the EU/ECB should take the gloves off

none of this tip toeing around the big elephant in the room

the unions are dragging this country into oblivion

Riskymove

ei.sdraob wrote: »

the EU/ECB should take the gloves off

ah sure they are just doing what they always do...setting a golden rule in the SGP and then keep giving exceptions...this isn't the first time you know


....pure spin anyway...what are they going to do?...give massive fines to countries that dont have any money?....

....the SGP is many ways simply an aspirational document

P. Breathnach

RealityCheck wrote: »

... We now face the prospect of massive cutbacks for at least the next five years. You just never know,maybe the unions will get there wish of extending the adjustment to 2017:rolleyes:.

I am an optimist. I believe that during the next five years there will be some degree of recovery. That recovery will soften, but not eliminate, the need for cutbacks. This might prove to be the toughest year.

If we are struggling to make the necessary cutbacks this year, it begs the question how do we do it for the next five years without serious social problems among others? Is it a case of being damned if we do and damned if we dont?

Part of the difficulty this year is a collective failure to recognise how great the problem actually is; another part is the wish of so many people that somebody else should shoulder the burden. I think it will eventually sink in on people that we are all in this together, and that nobody has a moral right to be exempt from the pain.

murphaph

Riskymove wrote: »

....pure spin anyway...what are they going to do?

Stop lending us money (through our banks) to hand over to the public sector in the form of OTT wages. It's about time the spotlight was shone on Ireland tbh.

RealityCheck

P. Breathnach wrote: »

I am an optimist. I believe that during the next five years there will be some degree of recovery. That recovery will soften, but not eliminate, the need for cutbacks. This might prove to be the toughest year.

Are the cutbacks not part of the problem? as they may well stifle any recovery than may soften the blow. We really need the government to play there cards right and make the right cutbacks and tax increases so that growth and recovery are possible. I am sorry to say but I have very little faith in the present government doing that, as they have proved time and time again to be ineffective and out of their depth.

P. Breathnach wrote: »

Part of the difficulty this year is a collective failure to recognise how great the problem actually is; another part is the wish of so many people that somebody else should shoulder the burden. I think it will eventually sink in on people that we are all in this together, and that nobody has a moral right to be exempt from the pain.

Sometimes I really wonder will that happen. You have to wonder has the Celtic tiger changed us as a people. I believe it has and that people are only really interested in their own good and not the common good. It may take a few more years of economic misery to change people again.

eoinbn

P. Breathnach wrote: »

I am an optimist. I believe that during the next five years there will be some degree of recovery. That recovery will soften, but not eliminate, the need for cutbacks. This might prove to be the toughest year.

Part of the difficulty this year is a collective failure to recognise how great the problem actually is; another part is the wish of so many people that somebody else should shoulder the burden. I think it will eventually sink in on people that we are all in this together, and that nobody has a moral right to be exempt from the pain.

Governments are always optimistic, and never realistic. The government had framed their 2013 plan with the hope that we would bring in €34bn in tax this year and €35bn next year and €44bn in 2013- that was hugely optimistic growth. They will probably bring in €31.5bn this year, and I think the current projection is €29.5bn for next year. The extra year isn't about making the current cuts easier, it's about making MORE cuts of the same magnitude.

I don't think it will ever sink in, but I do think it will be hammered into people at some point next year. The reality is that the cuts that really need to be made are so massive that no government will be able to implement them.

Dannyboy83

ei.sdraob wrote: »

the EU/ECB should take the gloves off

none of this tip toeing around the big elephant in the room

the unions are dragging this country into oblivion

According to DMcW's latest article, they are in the process of degloving:
http://www.davidmcwilliams.ie/2009/11/08/worst-case-scenario-looms

P. Breathnach

RealityCheck wrote: »

Are the cutbacks not part of the problem? as they may well stifle any recovery than may soften the blow.

We don't have any real option on cutbacks. The exchequer deficit is enormous. So the idea of pump-priming is not on the agenda. In any event, given how much our economic activity is trade-related, a stimulus package would be of less benefit here than in most other economies: much of it would leak into imports, more than elsewhere. On the other hand, a stimulus package in our major export markets would benefit us.

We really need the government to play there cards right and make the right cutbacks and tax increases so that growth and recovery are possible.

Of course.

I am sorry to say but I have very little faith in the present government doing that, as they have proved time and time again to be ineffective and out of their depth.

The main opposition parties don't inspire much faith in me, either, and the minor opposition parties are really scary.

Sometimes I really wonder will that happen. You have to wonder has the Celtic tiger changed us as a people. I believe it has and that people are only really interested in their own good and not the common good. It may take a few more years of economic misery to change people again.

I agree that we have changes over the years, and not in a way that I like. I hope that we have sufficient basic decency left, and that the loud-mouthed advocates of mé-féinism will be quietened.

ei.sdraob

were borrowing 25billion or so a year and spending it on welfare and PS

thats quite a form of a "stimulus" as is

the whole boom was a giant "stimulus"


time and time again I say the money was wasted in housing not in invested in business and renewables like other eurozone members

we are now paying for it

RealityCheck

P. Breathnach wrote: »

We don't have any real option on cutbacks. The exchequer deficit is enormous. So the idea of pump-priming is not on the agenda. In any event, given how much our economic activity is trade-related, a stimulus package would be of less benefit here than in most other economies: much of it would leak into imports, more than elsewhere. On the other hand, a stimulus package in our major export markets would benefit us.

To be honest thats not really where im coming from. Id be more of an advocate of making the whole adjustment now and building from the bottom up instead of having a stagnant economy for many years to come as a result of 4/5 deflationary budgets. Europe allowing us to make the full adjustment over a longer period of time I feel will be worse in the long term than if we just cut our cloth to measure now. We are screwed either way. It just a case of finding what will get us in a healthy position quicker. I beleve slow fiscal adjustment is the wrong route to take.

Diarmuid

EU set to give Ireland until 2014 to meet its budget deficit target

Great. More rope with which to hang ourselves.

eoinbn

ei.sdraob wrote: »

were borrowing 25billion or so a year and spending it on welfare and PS

thats quite a form of a "stimulus" as is

the whole boom was a giant "stimulus"


time and time again I say the money was wasted in housing not in invested in business and renewables like other eurozone members

we are now paying for it

That's my take on it aswell. I was very surprised at David McWilliams appearance on the panel. He also seemed to be suggesting that we borrow more to stimulate the economy, citing the US and the UK as examples. Maybe he has been in Oz/China for too long but someone should tell him that we are already borrowing about the same, if not more, as a % of GDP, as both those countries.
One of the panelists on Vincent Browne made the interesting point last night that Germany, a country of 82m, is worried about it's deficit of €80bn(€50bn is due to a stimulus package). If we expand our population to match germany our deficit would be €450bn! So if germany is worried about their deficit, it's should be no surprise that a country with 5.5 times the problem is paralyzed in fear.

seangal

ei.sdraob wrote: »

the EU/ECB should take the gloves off

none of this tip toeing around the big elephant in the room

the unions are dragging this country into oblivion

bull
looks like the union are the only ones that are asking where the rest of the cuts are going to come from in the next 3 years

seangal

murphaph wrote: »

Stop lending us money (through our banks) to hand over to the public sector in the form of OTT wages. It's about time the spotlight was shone on Ireland tbh.

well if we dont get the wages we dont have it to spend to keep you in a job
The way you are talking you would think that the 21 billion the public sector gets is just put in the bank.
I provide a service to the state i get paid for it and i spend it in the private sector to keep them in jobs

seangal

seangal wrote: »

well if we dont get the wages we dont have it to spend to keep you in a job
The way you are talking you would think that the 21 billion the public sector gets is just put in the bank.
I provide a service to the state i get paid for it and i spend it in the private sector to keep them in jobs

why don't we double wages all round so?

RealityCheck

seangal wrote: »

bull
looks like the union are the only ones that are asking where the rest of the cuts are going to come from in the next 3 years

Exactly asking, not doing. ICTU want cuts over 8 years not 3.

RealityCheck

seangal wrote: »

well if we dont get the wages we dont have it to spend to keep you in a job
The way you are talking you would think that the 21 billion the public sector gets is just put in the bank.
I provide a service to the state i get paid for it and i spend it in the private sector to keep them in jobs

We have no choice. The money paying for your wages will dry up sooner rather than later.

seangal

Deleted User wrote: »

why don't we double wages all round so?

point is we have to keep money in circulation
if we take 16 billion out over the next 3 years that has to to lead to lower sales of goods / services ect and has to lead to longer dole que.

seangal

RealityCheck wrote: »

We have no choice. The money paying for your wages will dry up sooner rather than later.

well it is like this if my wage dry up the private sector will lose 21 billion in spending so where will that put you
we are due a baby very soon and if i get another cut i have no choice but to go north to buy all out stuff which we can get for 30% cheaper
how will that help our problem?
private sector rip off again i even asked the store to match the prices that there store charges in the north and they as much as told me to get lost
so cut away but we will be forced to join the 500k people who shop north and will hand my wage or dole over to the uk

Dannyboy83

seangal wrote: »

well it is like this if my wage dry up the private sector will lose 21 billion in spending so where will that put you

This does not follow, but you already know this.

we are due a baby very soon and if i get another cut i have no choice but to go north to buy all out stuff which we can get for 30% cheaper
how will that help our problem?
private sector rip off again i even asked the store to match the prices that there store charges in the north and they as much as told me to get lost
so cut away but we will be forced to join the 500k people who shop north and will hand my wage or dole over to the uk

Go North and get the best deal for you and your family.
This entire country needs reform, not just the public sector pay.

Aside from the very obvious consequences for your family by paying rip off republic prices, by staying here and paying rip off prices, you are effectively discouraging reform in the private sector and encouraging the government to keep a debilitating vat rate at 21.5% etc.

Prices will fall when Public sector wages fall, but regardless, Go and get the best deal for your family that you can, wherever it may be.

MaceFace

P. Breathnach wrote: »

I am an optimist. I believe that during the next five years there will be some degree of recovery. That recovery will soften, but not eliminate, the need for cutbacks. This might prove to be the toughest year.



Part of the difficulty this year is a collective failure to recognise how great the problem actually is; another part is the wish of so many people that somebody else should shoulder the burden. I think it will eventually sink in on people that we are all in this together, and that nobody has a moral right to be exempt from the pain.

I think this is spot on. We will probably come out of recession mid-next year and lets all hope that its not a double dip. If its not, then the cuts won't have to be as drastic.

I think though that next year we will see a lot more of the lower paid being dragged into the tax net as well as an increase in the upper rate as well as a so called super tax.
I think Lennihan might be holding these off until the recovery is under way somewhat so vested interests will be less reluctant to depart.

jetfiremuck

The Gov do not create jobs they are not wealth producers.... can people understand that. Its easy to be lulled into thinking that if the Gov employ people that it contributes. Most public service jobs are costs associated with providing a service either like (RTE, Health Board) and the like. Most private companies are formed and run for the benefit of the company owner, yes the employees get paid etc but in reality thats how it goes. The Gov need to provide incentives either thru offset taxation/ vat reduction small low interest business loans anything in order to encourage business to either increase employees or for small start ups. Without this I can see no hope of direction out of this mess. Does anyone see it this way?

MrMicra

This is an attempt to compel Fine Gael to inflict economic pain and allow Fianna Fail to avoid cleaning up the mess that they created. Civil servants involved in these negotiations should lose their pensions.

seangal

Dannyboy83 wrote: »

This does not follow, but you already know this.



Go North and get the best deal for you and your family.
This entire country needs reform, not just the public sector pay.

Aside from the very obvious consequences for your family by paying rip off republic prices, by staying here and paying rip off prices, you are effectively discouraging reform in the private sector and encouraging the government to keep a debilitating vat rate at 21.5% etc.

Prices will fall when Public sector wages fall, but regardless, Go and get the best deal for your family that you can, wherever it may be.

but not all prices are going down
like it still cost me €60 euro to go a doctor
we are still being ripped of my private sector here and they have slashed jobs to protect profit
IBEC survey show that just 8% of private sector have take pay cut
100% of public sector have take pay cut so maybe it is time the other 92% take a cut to make us more competitive

RealityCheck

MaceFace wrote: »

I think this is spot on. We will probably come out of recession mid-next year and lets all hope that its not a double dip. If its not, then the cuts won't have to be as drastic.

As far as I am aware the adjustment that we are making is required to tackle the structural defecit, i.e. the one that will always be there if things are left as is with predicted growth factored in. The savings that we are projected to make account for growth expected in 2011 to 2013. A recovery wont have much effect on the requirement of drastic cuts, unless we have another major boom period. And where is that going to come from .

P. Breathnach

RealityCheck wrote: »

As far as I am aware the adjustment that we are making is required to tackle the structural defecit, i.e. the one that will always be there if things are left as is with predicted growth factored in. The savings that we are projected to make account for growth expected in 2011 to 2013. A recovery wont have much effect on the requirement of drastic cuts, unless we have another major boom period. And where is that going to come from .

The structural deficit is real, no argument there. But is exacerbated by very low tax yields and high spending on welfare. Tax yields are depressed not only because of falling employment and wages, but also by people being cautious about spending what they have, and depressing the VAT yield. Some degree of recovery will increase the tax take on people's earnings, reduce the amount spent on social welfare, and might boost VAT revenues.

RealityCheck

P. Breathnach wrote: »

The structural deficit is real, no argument there. But is exacerbated by very low tax yields and high spending on welfare. Tax yields are depressed not only because of falling employment and wages, but also by people being cautious about spending what they have, and depressing the VAT yield. Some degree of recovery will increase the tax take on people's earnings, reduce the amount spent on social welfare, and might boost VAT revenues.

That is cyclical though, and will inevitably bounce back some time in the future. It has no effect on the structural defecit that we must reduce. The cyclical and structural defecits are independent of each other. The reason we have a structural defecit is due to the fact we had a massive and unsustainable boom. Unsustainable meaning it wont happen again.

Dannyboy83

seangal wrote: »

but not all prices are going down
like it still cost me €60 euro to go a doctor

I agree mate, I can't remember the last time I went to one myself, but we were going through receipts the other day for the health insurance, my GF had a receipt from late 2007 and it was €30.
2 years later and its €60+ for her.
That is quite scary tbh, it shows how out of line we became, and how massively we have to regress in order to reform even in a merely adequate manner.

I guess reform will be slower to follow in these areas, but it will have to change, inevitably, or there will simply be no customers.
Tbh, my GF will be going home to Lithuania next year for some important medical tests, I'll be going with her myself to get my teeth looked at.
I had my teeth done in Poland last time, that was 2006/7, saved a small fortune. I haven't seen an Irish Dentist in years at this stage.

There was a report which NESF posted in the forum about the Dutch healthcare which was very interesting to read. Perhaps a system similar to that will be implemented here.
I know this is stressful in the short term, but in the medium term, things will have to change.
We are in an unprecedented crisis and reform will have to come everywhere, without exception. Even Ministerial pay & expenses & the Seanad.

we are still being ripped of my private sector here and they have slashed jobs to protect profit
IBEC survey show that just 8% of private sector have take pay cut
100% of public sector have take pay cut so maybe it is time the other 92% take a cut to make us more competitive

I'm not sure if you misunderstand or are just angry.
If its anger, believe me, I sympathize fully with you.
Don't let bitterness consume you tho. It won't do you any good and it won't do Fianna Fail any harm.

I was extremely bitter when my GF lost her job in September 08 last year.
<<< Look at my join date;)
When her Job Seekers benefit was cancelled in September 09, I wasn't really bitter anymore.
Partially because this board has educated me a lot.
And partially, because we've just had to accept that, for a while, this is the way its gonna be, and there is nothing we can do to change it. Life goes on.

When all is said and done, there is an awful lot of us who didn't participate in the madness of the Celtic Pyramid.
The only people that are going to have major pain are the ones who have living it up (frequently at our expense) so I don't have much sympathy for those people, a dose of reality might do them some good.

All I can say is:
(i) Ensure you utilize your vote when the time comes. Fianna Fail have floated a colossal karma bubble that's just itching to be burst.
(ii) Tell your colleagues & union members to continue protests (regardless of public sector pay reform) until there is ministerial pay & expense reform. There is no question at this stage that the cuts will come, but at least you guys can make sure some good will come of it.