Thanks Christine, but we’ll look after our own cost-of-living measures
Minister rejects call to slash financial support
FINANCE minister Michael McGrath has rejected claims by the European Central Bank president that eurozone countries should start to roll back cost-of-living support measures.
Countries across Europe, including Ireland, have introduced measures to ease spiralling energy costs. The Government has paid €600 to each household to help with energy bills.
Speaking earlier this week, Christine Lagarde said: ‘As the energy crisis becomes less acute, it is important to now start rolling these measures back promptly in line with the fall in energy prices and in a concerted manner.’
Asked about these remarks yesterday, Mr McGrath said while he understood the principle behind her comments, the Government had independence in fiscal policy.
‘I understand the economic logic behind what the president of the ECB has said but governments have to make decisions that are right for their own respective countries. And we do have to consider the reality of cost-of-living pressures that households are facing in their day-to-day lives and that, for me, is going to be the critical issue,’ he said.
‘Fiscal decisions are made at a national level and we will make the decisions in the interest of the people we represent and the country we serve.’
Mr McGrath was launching the annual report on the national debt, which now stands at €44,000 per person, one of the highest per-capita debt burdens in the world.
The Department of Finance publication shows Ireland’s public debt rose to €226billion at the end of last year.
This is up 11% from €203billion before the Covid pandemic, when the debt per capita stood at €41,300.
The national debt stands at 86% of Ireland’s gross national income, which is down from pre-pandemic levels.
The report warned of ‘significant risks’ to the public finances in the years ahead, with both immediate and medium-term challenges pressuring the State’s fiscal position, and ‘clear vulnerabilities’ due to dependence on corporation tax.
Mr McGrath said the increase in public indebtedness was ‘unavoidable’ due to the Covid pandemic, and warned of challenges that Ireland faces which will result in ‘large costs’.
‘The war in Ukraine and the associated energy price shock have induced a cost-of-living crisis, placing renewed pressure on the State’s fiscal position,’ he said.
‘Ireland continues to have one of the highest per-capita debt ratios in the developed world,’ he added.
‘Several structural features of Ireland’s debt – with the majority of debt locked in at fixed prices and relatively long maturities – insulate us somewhat from the changing interest rate environment brought about by these shocks.’
‘Nevertheless, the refinancing of our existing debt over the medium term will most likely lead to increased debtservicing costs, the first call on the public finances.’
He also said that the public finances were vulnerable to a shock in corporation tax receipts or to the multinational sector, which could result in a ‘very large deficit’.
‘This report underlines the need for prudent management of debt and the rebuilding of our fiscal buffers,’ he added.
Report warns of ‘significant risks’