'These difficulties won't go away in a month': Donohoe rules out inflation interventions

Finance Minister Paschal Donohoe says Ireland 'cannot pretend that it can control mortgage interest rates'. Picture: Leah Farrell/RollingNews.ie

Ireland cannot "pretend that it can control mortgage interest rates", the finance minister has said.

Paschal Donohoe was speaking in response to a Labour bill that seeks to cap the rate on variable mortgages, a move he said was not possible.

"We've just seen two banks leave Ireland, with the impact that's going to have on choice to the consumer and potentially new mortgage lending and investing in small businesses.

"Pretending that we can manage the interest rate in a way no European country can is only going to deepen those risks, make it harder to get new financial services into Ireland, and undermine the banks that we have."

Mr Donohoe said that he appreciates that interest-rate increases would hit homeowners in the coming months, but added that "pretending that we can control interest rates is a recipe for further and bigger difficulties".

Speaking to RTÉ's Morning Ireland programme, Mr Donohoe emphatically ruled out any interventions in the economy before October’s budget.

"It's really important that I be open and honest about where we are," Mr Donohoe said. "We've done our best to help, we will help again at the budget, but the issues that we have cannot be responded to month by month, because these difficulties will not go away in a month." 

Mr Donohoe said that measures brought in thus far have been targeted, citing the changes to the fuel allowance as an example. However, he said the broader measures around VAT and excise duties were necessary to help people commuting and travelling.

Mr Donohoe said that while he was not going to flag his budget priorities, he indicated that he would extend the allowance for over-70s who hold a medical card to pay the lower 2% USC.