The Irish government should stick to its plan for 3 billion euros ($3.8 billion) of savings in its budget for next year as the risks from easing up on austerity soon are too high, according to the Economic & Social Research Institute.
“The price of easing off too early if you get it wrong is very high,” said John FitzGerald, a research professor at the Dublin-based think tank, at a briefing for reporters on the publication of its report on the Irish economy to 2020. The disadvantage from being “tough” next year is “relatively small,” he said.
The ESRI today outlined three potential scenarios for the Irish economy to 2020: a recovery scenario, delayed adjustment scenario and a stagnation scenario. In the recovery scenario based on a return to growth in the European Union, the ESRI sees no more government expenditure cuts from 2015.
By contrast, in the stagnation scenario where the EU experiences little or no growth to 2020, Ireland would need to continue with “tough budgets to 2020” even as the nation’s debt level remained high and the economy vulnerable to shocks.
FitzGerald said the ESRI was uncertain which scenario was most probable.
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