Irish Central Bank Warns Government Over Economy

by Jason Gorringe, Tax-news.com, London

27 June 2001

The Irish Central Bank warned on Monday that the government must do more to cool down the country's economy if they are not to risk a hard landing. In its latest quarterly bulletin, the bank sided in part with criticisms made by the European Union regarding Ireland's recent budgets, which included tax cuts and increased spending.

The Central Bank noted that consumer spending was 'especially strong' at present, and suggested that the government should alter its spending and tax cutting plans, stating that 'fiscal policy can make a useful contribution to promoting stability at this juncture.' However, Finance Minister Charlie McCreevy is notoriously stubborn and fearless in these matters, and shrugged off censure from European officials in February of last year, when they criticised him for refusing to alter the budget.

Growth is likely to fall to around 6.5% this year, down from an eight year average of 8%, according to the report. However, it has been suggested that the government should aim for just 5% growth, or risk the economy overheating. However, the report did note that Ireland had limited ability to control the pace of its economy, as it is one of twelve nations participating in the common euro currency, and since 1999 its interest rates have been set by the European Central Bank in Frankfurt, which tends to pitch rates towards the slower growth economies such as France and Germany.

'Central banks are not against growth,' said the Irish Central Bank's assistant director general, Michael Casey. 'The question is how to make growth enduring and sustainable.'

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