Decisive budgetary action welcomed overseas

THE decisive and brave action taken by the Government is likely to be well received by overseas observers.

This is according to Davy economist, Rossa White who, along with other national and international analysts seemed impressed by this week’s budget.

Irish shares yesterday closed up 0.6% with the banks all losing ground.

AIB was down 2.5% to €1.35, Bank of Ireland was down 3.5% to €1.45 while Irish Life and Permanent fell 3.1% to €3.15.

NCB said overall the budget was a good outcome for the Irish economy. “Ireland is in a damned if you do, and damned if you don’t position. The measures in Budget 2010 will have a deflationary effect on the economy, but the theory and evidence supports the view that Ireland’s best course of action is to restore competitiveness and tackle the public finances aggressively, particularly current expenditure.”

They said Ireland is leading the world in aggressively tackling its fiscal deficit.

“There are very few economies in which the Government would go after public sector pay and unemployment benefit without being shoved by the IMF,” they said.

In the latest European Commission forecasts, Ireland is, with Slovakia, predicted to have the highest growth of any of the Euroland countries in 2011.

Goodbody economist Dermot O’Leary said Ireland is one of the few countries in the EU that has decided to take early remedial action to reduce its budget deficit. “In the short-term, this will mean that the Irish economy will remain weak, but the recent rise in bond yields looks unjustified to us in light of the credible action that has been taken.”

He said Budget 2010, while painful, shows a real will to sort out the problems which are inside Ireland’s control.

Mr White said, while capital spending was reduced by almost €1 billion, falling tender prices mean that government investment will not drop in real terms and Ireland’s spending on infrastructure will remain above the European average.

Bloxham Stockbrokers said that, although the main focus of the budget was on the spending side, further tax increases could still be needed over the next few years to get the public finances back into balance.