- Fiscal Council opposes scale of spending increases, tax cuts
- Election must be held by April; government support rising
“Who speaks of Syriza now?” That was the question Irish Public Expenditure Minister Brendan Howlin asked as he laid bare the government’s strategy in parliament to win a second term in an election due within months.
Detailing the 2016 budget in Dublin on Tuesday, the coalition promised fiscal restraint and stability, drawing a contrast with the chaos that engulfed Greece after Alexis Tsipras’s Coalition of the Radical Left, or Syriza, won power in January. The Irish administration also promised to follow up yesterday’s announcements of 1.5 billion euros ($1.7 billion) of tax cuts and spending increases with more bounty if re-elected.
“One might consider this budget something of a small ‘thank you’ to those who helped Ireland emerge from a torrid eight years,” said Neil Gibson, an economic adviser to accountancy firm EY. “The potential to give a little bit back arose largely due to Ireland’s stellar economic growth and in a pre-election budget this opportunity was warmly embraced.”
While Prime Minister Enda Kenny has led the nation out of its worst recession on record and brought public finances under control after an international bailout, voters have been largely unimpressed. In a bid to counter the rise of left-wing parties such as Syriza and Sinn Fein closer to home since Kenny’s 2011 election victory, the government distributed some of the proceeds from the economic recovery to taxpayers, pensioners and even makers of craft beer.
The budget drew criticism from opposition politicians and some analysts for stoking an economy which is already the fastest growing in the euro-region. The government also said late Friday that it’ll lift spending by about 1.5 billion euros in the last quarter of 2015, allowing it sidestep new rules which limit the scale of increases next year.
The budget “carries echoes of mistakes we have made in the past, ” John McHale, chairman of the Irish Fiscal Advisory Council, said in an interview with broadcaster RTE on Wednesday.
Pledges included reducing an emergency income tax, raising payments to pensioners, and further restoring a Christmas bonus for welfare recipients. That’s a reversal of a little of the austerity that helped Ireland win back the trust of bond investors.
The spread between Ireland’s 10-year benchmark government bond and German securities of a similar maturity has narrowed to 58 basis points from 298 basis points just over two and a half years ago.
Support for Kenny’s Fine Gael, the bigger party in the coalition, is running at 28 percent, according to a Red C Research & Marketing Ltd. poll last month. The junior partner, the Labour Party, scored 10 percent. While the government’s ratings are improving, support is still down from a combined vote of 55 percent in the 2011 election.
While the economy is now bigger than it was before the economic crash, household income is still 9 percent below its peak, KBC Groep NV’s Irish unit said.
Howlin disputed the notion that the government is trying to buy an election win. “Our recovery, though not yet complete, is not only a justification of our policies, but a condemnation of the easy alternatives proffered by some,” he told a crowded parliament.