The EU has given the Irish economy a clean bill of health despite a long list of warnings on everything from property prices to the cost of pensions.
All public and private debt ratios prompted the European Commission to declare Ireland free of “imbalances” yesterday, 10 years after the country first came under additional scrutiny under the bloc’s new post-crisis surveillance regime.
Instead of the usual warnings about taxes and banks, the bloc shifted its focus to Ireland’s lack of progress on energy and climate targets in its annual spring recommendations this year.
Ireland has been urged to do more to encourage recycling, improve wastewater treatment and reduce fossil fuel use.
Buoyant growth supports the bloc’s bullish view as the pandemic and war in Ukraine failed to impact Ireland’s performance.
The Irish economy is expected to grow twice as fast as the EU average – 5.4 per cent versus 2.7 per cent – after Brussels revised down its overall forecasts last year due to the war.
The ratio of debt to gross domestic product (GDP) fell to 56 percent last year, the commission said, and is expected to fall further to 45.5 percent by 2023 – well below the bloc’s 60 percent limit.
But compared to adjusted gross national income (GNI*), which excludes the impact of industries like aircraft leasing, debt was 105.6 percent last year and will be 89.9 percent in 2023.
The commission also welcomed the significant decline in Ireland’s household and corporate debt, as total private debt had fallen by almost half from a peak of over 300 per cent of GDP in 2015, and said banks had cut non-performing loans to historic lows.
The results put the Irish economy on a stronger footing than Germany, France or the Netherlands, all of which face constant additional scrutiny from EU officials.
The commission said that Irish house prices “do not appear to be overvalued” and that the “risks of another property bubble remain limited”.
“The positive economic outlook should contribute to further deleveraging of public, private and external debt, but the sharp rise in house prices may remain a problem for some time to come,” the Commission services report said.
“Right now, average national house prices do not appear overvalued by standard valuation metrics, although housing affordability remains a concern.”
In a series of economic reports, Commission officials warned that house prices were “high” relative to incomes, which “could hamper Ireland’s ability to attract a mobile skilled workforce and lead to downward pressure on wages”.
The reports also pointed to rising pension and healthcare costs, creaking water and waste infrastructure, planning delays on renewable energy projects and bankruptcy laws hurting banks’ profitability.
Over-reliance on corporate taxes, which now account for a fifth of total tax revenue, is also a concern, the Commission reports say.
It also said that “significant outgoing royalties and dividend payments in recent years suggest companies may be using Irish tax rules for aggressive tax planning purposes”.
https://www.independent.ie/business/budget/eu-says-we-are-free-from-economic-imbalances-41681006.html EU says we are free from economic ‘imbalances’
