And Here's Why The Irish Budget Plan Has No Chance Of Working

We’ve watched the whole Ireland 4-year plan announcement, and… we’re pretty sceptical.

Let’s quickly hit on some key points, some of which are from the longer budget document (.pdf via Lorcan)

First, it is based on the hope that the government can implement extreme austerity and still grow the economy,, which is incredibly dubious, especially without the ability to make any big structural adjustments. The biggest one they’ve envisioned is a cut in the minimum wage.

Here’s how Ireland hopes to bend down the curve on expenditures:


Then there’s the fact that all of the revenue hikes are to fall on the backs of consumers and retirees (there will be a hike in pension-related taxes) and not on corporations or banks, which may be inevitable, but it’s the kind of strategy that will flip out the public street and cause riots.

Here’s another big problem…  Check out the government’s funding expectations.


Note that under the PESSIMISTIC scenario, government funding costs are assumed to 4.4%! That’s like half of what the funding cost are at right now, and lower than any of the other PIIGS. So for this to work, we’d need a massive hike in confidence, which seems implausible given that even Greece with full access to the European Financial Stability Fund enjoys a massively higher interest rate.

Bottom line: An inequitable tax scheme, overly optimistic growth expectations (especially in light of austerity), and over optimistic funding cots.

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