The new Government has been told by the OECD not to overly worry about the build-up in Ireland’s sovereign debt during the Covid-19 crisis and instead focus on preventing a return of the scourge of long-term unemployment.
In an interview with the Irish Examiner, Ben Westmore, the senior economist who heads up the Ireland desk at the influential Organisation for Economic Co-operation and Development, said it was “slightly” more concerned about the outlook for Irish employment after fewer than expected people migrated from the pandemic unemployment payments even as the restrictions lifted in recent weeks.
The three-party coalition should, however, be in no rush to cut back on the Covid-19 welfare supports needed by around one million people “because Ireland is facing a pretty big hit in terms of demand in the economy and measures to support the recovery are going to be needed for some time”, Mr Westmore said.
Under any second Covid-19 wave, the new Government "should not be concerned about the deficit that may be run up”, he said.
“We all understand what happened to Ireland last time with the last financial crisis but we would advise that all governments should not be too rushed to return to consolidation and during this life support stage,” he said.
“It is not that the sovereign shouldn’t stop worrying about it, but during this stage, not doing enough is a much worse strategy than doing too much in terms of stimulus, in terms of the scarring effects on employment in future years,” he said.
New figures showed there were almost 27,000 fewer people availing of the pandemic unemployment payment in the past week.
However, there are still over one million people - equivalent to over half of all private-sector workers - who need some sort of Government welfare payment to make ends meet.