Finance minister Paschal Donohoe has hailed the EU’s planned economic retaliation to the Covid-19 pandemic, but said Ireland must essentially help itself by keeping its borrowing levels in check.
In an online address to economic think-tank the Institute of International and European Affairs, or IIEA, Mr Donohoe said Ireland must avoid repeating the past of having to rely on overseas bailouts to help us out of trouble. He also said Ireland will resist any further challenge to its 12.5% corporate tax rate when the dust settles on the crisis, despite supporting increased international co-operation.
“The foundation of our economic stability is paying for our living standards – and our public services – ourselves. Central banks and savers in other countries will not pay for this decision,” he said.
“The low interest rates of today will not be the low interest rates of forever. That which is borrowed now will have to be either paid back or refinanced at a higher interest rate in the future…So, over time and as our economy grows, we need to reduce our borrowing,” Mr Donohoe said.
He said even minute increases in interest rates could have a very significant effect on an economy like Ireland’s with a €200bn national debt.
Mr Donohoe said the Covid crisis highlights the value of “the European project” and of the importance of international co-operation. He welcomed France and Germany’s €500bn EU recovery fund proposal and said money should be invested developing the digital and green economies.
“Our citizens want, and expect, the EU to be ambitious and transformative in its response to this unprecedented crisis,” he said, adding that the EU’s total combined economic response, amounting to nearly €2 trillion, meets these expectations.
However, he reiterated that Ireland is likely only to tap a small amount of EU recovery funding as a wide search for support could undermine market sentiment towards the country.
His comments came amid growing calls for more government supports. Accountancy firm Mazars said more is needed to help businesses survive. Goodbody said the €2bn SME credit guarantee scheme may be too small and Ireland’s overall support package too light. It has called for more 100% guaranteed loans, equity injections and additional grants, as well as an extension of the wage subsidy scheme.