Post-troika policy agenda

The Government has been operating in what might be described as a straitjacket in recent years.

Outside some minor tweaks, the memorandum of understanding signed by the previous government in 2010 has generally decided the direction of economic policy.

Therefore, although enhanced fiscal co-ordination in the euro area will provide some restraint, the Government will, for the first time, be in the position to set the direction for policy in 2014. We believe three areas of focus in the post-bailout period should be:

* 1. Maintain a target-based approach

Although the process was an exhausting one for policymakers, the targets set out and checked on a quarterly basis acted as an important disciplinary tool over recent years.

Policymakers have been held to account, resulting in certain tasks getting completed that would traditionally been put on the long finger. For this reason, we think it isimportant that the Government recognises the benefits of this approach and publicly sets out ambitious, yet achievable, targets over the next two years at least. The troika may be absent, but electorate and the bond markets will be around to scrutinise the results.

* 2. Focus on the supply side

For very good reason, the Government’s focus over recent years has been on solving short-term issues, such as those in the banking system and the public finances. While there is still more work to do in these areas, the problems are not nearly as acute as they were at the start of the IMF/ EU programme in 2010. The upcoming medium-term plan provides an opportunity to set out how growth will be achieved over the medium-term. Given the type of investment that Ireland is trying to attract, we would like to see a renewed focus on education policy.

This should identify the areas that will fill future skills needs and the ways in which these higher education standards will be funded.

We would also like to see an increase in capital investment, thus enhancing Ireland’s competitiveness.

* 3. Continue to develop diplomatic relations at an EU level

The Government has earned some kudos with its European partners for the way in which it has successfully implemented the economic adjustment programme and this is seen as proof that the “European model” of crisis management is working. Ireland has been able to use some of this political capital for arrangements such as the IBRC liquidation.

However, there is more to play for, particularly in relation to easing some of the legacy burden coming from tracker mortgages.

Ireland will need European help on this front. Ireland was given credit for advancing European issues in its presidency, rather than focusing on the narrow national interest. This is the correct approach, but the Government needs to press for further help to ensure that the economy, and the “success story” in the crisis, continues to be recognised as such.

* Dermot O’Leary is chief economist at Goodbody Stockbrokers