We must rely less on turgid eurozone

As the Dáil returns to business this week, the Government is moving very much into election mode.

We must rely less on turgid eurozone

It has committed to creating 40,000 jobs this year and bringing the unemployment rate back to single digits.

Furthermore, it has committed to increasing employment up to 2.1m by 2018, which would be close to full employment. Employment stood at 1.91m at the end of September. Based on what we know about the momentum in the economy, the employment target for 2015 looks very realistic and provided the economy manages to achieve average growth of around 3.5% per annum the medium-term employment target also looks achievable.

Given how vulnerable our very small, open economy is to international developments, the external environment will be important.

Ireland has been very lucky over the past couple of years that our two most important non-eurozone trading partners — the US and the UK — have been performing quite strongly.

Over the next few years, one would have to believe that the ongoing travails of the eurozone represent the greatest external threat to Ireland’s wellbeing. All recent economic indicators continue to paint a picture of a eurozone economy that is, at best, bouncing along the bottom with very little inclination to show any real vibrancy. Turgid is probably a good description to describe the eurozone. Aggressive action is needed.

This week, a ruling from the European Court of Justice appears to have paved the way for a bond-buying programme from the ECB.

While quantitative easing would not represent a silver bullet for the eurozone’s moribund economy, it would be a step in the right direction. However, it will have to be followed up with other policies, revolving around structural changes to the regulatory, labour market, and taxation environment in the eurozone; and a move away from the preoccupation with fiscal austerity. Time will tell, but the omens are looking somewhat more promising.

Here in Ireland, the news flow continues to be generally positive, a fact that may explain the somewhat better showing by Government parties in the most recent opinion poll.

Bill Clinton famously argued “it is the economy stupid”, but the clear economic recovery story has not given much support to Government over the past year. Perhaps this is now about to change. Time will tell.

Over the last few years, January has seen a trio of good news announcements from the IDA, Enterprise Ireland and Bord Bia. This year is no different. Last week, the IDA reported another good year for the agency; and this week we have got further good news from Enterprise Ireland and from Bord Bia.

The multi-national sector is obviously of great importance to the economy, but one feels increased reliance will have to be placed on indigenous firms and activity in an increasingly more difficult and competitive environment for foreign direct investment. Enterprise Ireland and Bord Bia are key policy players in the indigenous sector and continue to deliver good news and positivity.

Bord Bia estimates the value of food and drink exports expanded 4% in 2014 to reach a new record high of just under €10.5bn. Earlier last year, there were suggestions based on monthly CSO trends exports could come close to €11bn, but growth eased during the year, largely reflecting weakness in dairy and beef prices.

The share of exports to the UK has declined from 42% to 40%, but it still represents an incredibly important market for Irish food producers and thankfully it is growing quite strongly. The 45% rise in the value of trade to Asia is coming off a very low base but it just shows the potential.

Meanwhile, Ireland can be proud of big success stories such as Kerry, Dawn Meats, Flahavans, and Glanbia. Companies such as these will play a key role in ensuring that economic recovery spreads outside the greater Dublin area.

Jim Power

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