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Paschal Donohoe: Irish economy to make ‘good recovery’ despite €35 billion rise in national debt

The Covid-19 pandemic has driven a rise in the country’s level of debt.

PASCHAL DONOHOE HAS predicted that the Irish economy will make a “good recovery” in the second half of the year, despite a rise in national debt of around €35 billion due to the Covid-19 pandemic.

The Minister for Finance said the national finances could sustain the difficulties caused by Covid-19, adding that there is a level of savings and inherent resilience in major parts of the economy that could allow for a recovery.

He made the comments following the publication of the Government’s Annual Report On Public Debt.

Donohoe said that national debt had increased by about €35 billion – from €204 billion to around €239 billion – as a result of the effects of Covid-19 on the economy.

He added that the income and business supports the Government put in place, such as the Pandemic Unemployment Payment, would cost more than €12 billion alone.

The report found the sharp increase in debt due to Covid-19 pushed the debt pile of modified gross national income to 108% last year, which Donohoe described as “very high”.

It equates to public debt increasing to €44,000 for every person in the country.

It is expected to increase to 115% this year, or around €47,700 per person.

“Despite the challenges that we have with our debt, it comes against the context of national finances that can sustain this for now,” Donohoe said.

“And while I’m so conscious of the hundreds of thousands of people who have now lost their job, I’m very confident that we will get them back to work again.”

He added: “I know those words sound hollow to many at the moment, given the difficulty that we’re facing now, at the end of January, I strongly believe that when we make the progress that we have to make in beating this disease that there is is a level of savings within our economy and an inherent resilience in really important parts of our economy at the moment, that will allow us to deliver a good recovery for many in the second half of 2021, and then in 2022.”

Positive retail figures

The minister pointed to positive retail figures in December as an example of the economy’s resilience ins the midst of the pandemic.

Figures released by the CSO on Thursday showed that retail sales in December were 8.2% higher than the same in the same month last year before the pandemic.

The department’s chief economist John McCarthy warned the economy’s performance in the first three months of this year would be worse than anticipated but it would “take off” in the second half.

“The way I would describe it is worse in quarter one but probably better in the second half the year once we get the vaccine rolled out so that swoosh, that Nike swoosh we sometimes talk about is probably deeper in q1 and taking off faster in the second half,” he said.

“But there’s lots of water to go to the bridge between now and March when we’re doing the numbers and publishing them in April.”

The report emphasised that it will be important post-Covid-19 to put the debt-income ratio on a downward trajectory.

But Donohoe reiterated that increasing income taxes was “not the path” the Government was going to go down to deal with the debt.

“The biggest contribution that we will be able to make to reducing our deficit and dealing with the issues that we’re talking about here will be getting our country back to work,” he said.

“And if we get employment growing again, if we get back to our own employment rate falling in the way that it has in the past it will deal with much of the difficulty that we’ve had here.”

Donohoe said the Government would outline a medium term trajectory in its stability programme update in April of how it intends to reduce borrowings and improve finances.

He added that the Commission on Taxation and Welfare would advise the Government on options on how the debt can be paid for in the future.

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    Mute Bunny Johnson
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    Apr 28th 2022, 9:00 AM

    Justice that takes nearly 6 years is not justice nevermind fining an entity less than they spend on pencils.

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    Mute Tommy Roche
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    Apr 28th 2022, 10:43 AM

    @Bunny Johnson: Yea, should have fined them 23 million, not 23 thousand. Because it will come directly from the pockets of HSE management and not from the pockets of already hard pressed taxpa……oh, wait.

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    Mute Bunny Johnson
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    Apr 28th 2022, 11:15 AM

    @Tommy Roche: A judgement needs to be meaningful. If a fine is the method applicable then 10K is a meaningless amount, as always the legal teams received more than the fine! There needs to be proper repercussions and improvements not meaningless fines. Sack people.

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    Mute Allora
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    Apr 28th 2022, 12:01 PM

    @Tommy Roche: so let’s see lets not compensate people who are victims of state misgivings because taxpayers would carry the burden. Oh wait…. You are wrong not just on the point I’ve made here but on several economics fronts as well which tells me you dont know what taxpayers money does or how it works and also why this money is good for the economy going to a worker.

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    Mute Tommy Roche
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    Apr 28th 2022, 1:45 PM

    @Allora: I never mentioned compensation for victims wronged by the State. The article doesn’t mention compensation either. The money will not be good for the economy as it is a fine, not compensation, and as such will not be going to a worker. And maybe look up the word ‘misgivings’. I think you’ll find it doesn’t mean what you think it means.

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    Mute Allora
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    Apr 28th 2022, 6:22 PM

    @Tommy Roche: you are correct I should not have used misgivings in there. Shortcomings is what I meant to put there and my point stands. Yes I know the worker won’t get the money but still this fine is necessary. I was fined last week for parking illegally & will claim it as an expense. Its the same thing.

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    Mute Dave Harris
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    Apr 28th 2022, 10:37 AM

    What about the nurses who were injured? Were they compensated?

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    Mute Paul Fagan
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    Apr 28th 2022, 11:06 AM

    @Dave Harris: That would be a different state quango to the Health and Safety Authority. I assume the nurses lodged a claim with the PIAB within two years of the incident likely citing the HSE as respondents. Both parties likely accepted the PIAB assessment, hence the HSE admitting liability so this fine was only part of the cost.

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    Mute Shane McLoughlin
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    Apr 28th 2022, 1:41 PM

    So in other words the Government has basically fined itself? Or am I missing something?

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