Sudden end of Covid-19 business supports would create economic shock, says Finance Minister

Paschal Donohoe said this meant the wage subsidy scheme would not 'simply end' in June when it is due to expire
Sudden end of Covid-19 business supports would create economic shock, says Finance Minister

Finance Minister Paschal Donohoe said schemes like the Pandemic Unemployment Payment had mitigated much of the worst economic impacts of the virus. Picture: Brian Lawless/PA

Ending Covid-19 business supports suddenly would create an economic shock, the Finance Minister says.

Speaking on Today FM's  The Last Word, Paschal Donohoe said this meant  the wage subsidy scheme would not "simply end" in June when it is due to expire.

Mr Donohoe said the safest way to reopen the economy is a working vaccination programme into May and June.

"I recognise the risk [of removing the supports], and we will have to plan to see how we can reduce them, because it would be a tragedy to have come so far and supported businesses for so long that as we get to the stage of opening, we find the business that they gain by opening does not offset the loss, and harm that they've incurred because they were required to close.

You can see the challenges that we ran into in October and November when we tried to reopen and ended up in the face of a mutated disease. We can reopen safely with a vaccination programme."

Mr Donohoe continued: "What I will do with Government is look at the design of the schemes that we have that are capable of supporting an open economy, and continuing to nurture, big-, small- and medium-sized employers back to a point of viability. 

"And that is why, for example, it will not be an option to immediately turn off the Employment Wage Subsidy Scheme, because that is supporting, as I said, nearly half a million people in tens of thousands of employers – if it totally died off to zero, it will create a huge economic shock in itself."

He added that Central Bank figures released this week had shown that schemes like the Pandemic Unemployment Payment had mitigated much of the worst economic impacts of the virus.

Mr Donohoe said he felt direct injections of cash through the EWSS and CRSS schemes was a factor in the low take-up of the credit-based schemes the Government has implemented since the beginning of the pandemic.

"When the economy reopens, credit will become more important and businesses will take credit if they are in the position to grow."

Mr Donohoe said the impact on Ireland's economy was being mitigated but that there was "a risk" that there could be lasting impacts on sectors like hospitality which "has lost the largest amount of business in the closures".

On banks, Mr Donohoe said it was a given that Permanent TSB would take part of Ulster Bank's loan book. He said that he, as the majority shareholder in the bank, would only approve such a purchase "if it makes sense".

"Yes, Ulster Bank's exit from the Irish market means the main three banks are part or majority-owned by the State.

"What we will have to do as the economy recovers is look at how we can reduce that shareholding."

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