It’s too early to talk about budget cuts for next year when it’s almost impossible to keep up with what’s happening weekly in the here and now.
It shouldn’t be too surprising that officials in the Treasury Department are feeling nervous. Ministers gave a nightly update on the introduction of new and major spending commitments on an apparently ad-hoc basis – relief for motorists, farmers, lorries and others suffering affected by the increase in fuel costs in the past week.
Hastily aggregated packages of up to hundreds of millions of euros are suggestive for the early stages of the Covid pandemic, when measures seem unlikely to be implemented at breakneck speed and without much time for debate.
But Covid seems to have created a lasting expectation that when things get tough financially, whatever the cause, the Government will step in to take the hit.
That is not sustainable. Covid is a unique situation.
The pandemic has demonstrated that in a crisis, Governments can act in a big way and bail out households and small businesses with a much greater degree of success than a decade of bank bailouts. previous century.
Unlike this week’s approach, the Covid response has a strategy behind it, with different policies and packages coming together to achieve a consistent master plan.
The massive financial support during the pandemic also reflects a one-time situation.
The pandemic is only temporary. That means a realistic prospect of a speedy economic recovery when public finances can be turned into rights.
Putin’s war in Ukraine is a very different kind of crisis. It may slow global growth this year but, more significantly, it will also mean lasting changes in our economy, some of which will be permanent. Taking in about 100,000 refugees from Ukraine will strain the delivery of some public services and will have financial costs, which could last for many years. It is right and wise to support our neighbors, but we should not be shy about thinking about the details.
Even more important will be the EU-wide momentum to cut dependence on imported fossil fuels once and for all. It is necessary, but we shouldn’t fool ourselves that it will be cheap or that it can completely protect all consumers from a financial downturn and create the expectation that a bailout may be unwise. good.
In the short term, inflation is at a high level. Homebuilders say their profits are being wiped out due to rising costs, which could cause them to delay or even cancel development plans. Even so, fuel costs are impacting some segments of the population.
On the other hand, growth is expected to slow in Ireland this year but remain at a seemingly strong level. We are adding jobs at a rapid rate in almost every sector of the economy, from software and science to restaurants and retail.
Income taxes are pouring in. Corporate taxes are on the rise. The social welfare bill is falling.
Public finances are in good shape. Households are – anyway – saving billions of euros. If Putin didn’t invade Ukraine, we would worry about the situation being too hot.
It is difficult to understand an economy that is pulling in many directions at once. That’s why the smart thing to do right now is to pause before any other ministers make big spending promises; but, no less, before officials started eyeing services for the chopsticks.
