(Bloomberg) — Ireland’s government unleashed a record package of budget measures to counter the dual threats of Brexit and the pandemic, as new restrictions threaten to derail a nascent economic recovery.
Speaking to lawmakers in Dublin on Tuesday, Finance Minister Paschal Donohoe said the entire 2021 budget package is worth close to 18 billion euros ($21.2 billion), with most being earmarked for a fund to deal with the virus and Brexit, more health spending and other measures.
“This package is unprecedented in both size and scale in the history of the Irish State,” Donohoe said. “We have faced numerous difficulties since independence, but never one like Covid-19.”
Irish FY20 General Govt Deficit to be Just Over EU21B: Donohoe
Donohoe’s strategy contrasts with Ireland’s last experience of economic crisis a decade ago, when the government slashed spending and raised taxes to win back the confidence of international lenders. The coronavirus response is one being echoed across Europe as countries try to protect businesses and jobs amid a resurgence of cases.
The measures were laid out a week after the coalition government moved the nation to a Level 3 lockdown, meaning most bars, restaurants and hotels are closed again.
Video: Ukraine Expects IMF Funds By End of 2020: Finance Minister (Bloomberg)
“Like others, the Irish government will eventually face the difficult task reducing the size of government spending,” Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin, said. “But with large immediate threats to the Irish economy, this is a time to keep the foot on the fiscal accelerator.”
Ireland also faces threats outside the virus, mainly the prospect of the U.K. crashing out of the European Union without a trade deal. That would cut Irish economic growth by half next year, according to the ESRI, a Dublin-based think tank.
The plan was framed on the assumption that the U.K. will exit the bloc without a deal and the virus will linger for much of next year.
Key measures include:
Some 3.4 billion euros for Recovery Fund Expenditure on core capital programs to increase by 1.6 billion euros Reduced sales tax rate for hospitality and tourism sector to 9% from 13.5%
(Adds measures in last paragraph)
For more articles like this, please visit us at bloomberg.com
©2020 Bloomberg L.P.