THE recovery prospects for the Irish economy continue to be weighed down by the collapse of the property market, according to the latest European Commission growth forecast.
The commission has predicted even lower growth this year than the Government’s recently revised figures, expecting it to be little more than 0.6% — less than what’s needed to pay off Ireland’s massive debt.
The report states: “Economic activity continues to be weighed down by the aftershocks of the real-estate bust.”
It warns that the bottom has not yet been reached for the construction industry and said it expects it would be at least next year before the building sector begins to contribute to the country’s economy again.
The commission warns that rises in interest rates will increase the number of households unable to pay mortgages. Higher rates will also mean less money for consumer spending.
The commission also predicts unemployment of 14.5% this year as the numbers emigrating have not been as high as anticipated.
The construction industry’s slow recovery is also partly to blame since at the peak of the housing market boom it accounted for more than 13% of total employment — nearly double the eurozone average.
The report states that the drop in dole queues will take longer as the recovery will be led by exports and capital-intensive production in key export sectors that are not big employers.
EU Commissioner for Financial Affairs Olli Rehn said growth and jobs are now the real challenge for Ireland in terms of growth.
He praised the Jobs Initiative and suggested falling prices, wages and cuts in the public sector were helping to restore competitiveness compared to Ireland’s position in 2008, when price levels were the highest in the eurozone.
He said the recapitalisation of the banks on foot of the exceptionally strict stress tests was another positive decision in Ireland’s favour.
Meanwhile, Enterprise Minister Richard Bruton has claimed France was pursuing a one-item agenda when it comes to Ireland getting a cut in the interest rate it pays on its bailout.
Ireland had agreed to tax changes under the EU/IMF loan agreement but corporation tax was not on the agenda, he said.
He acknowledged that there seemed to be a hardening of positions in France where he said they seems to be a one-item agenda.
He said the Government is open to a package that would improve economic performance but increasing corporate tax in a country that needed it to drive an export led recovery to repay its debts, was not an option.
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