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Irish CFOs Favour Bailout Completion

by Jason Gorringe,, London

26 November 2012

Three out of four Irish Chief Financial Officers (CFOs) in large companies favor scheduled completion of the European Union (EU)/International Monetary Fund (IMF) bailout program over a quick return to the bond markets, according to new research.

The research was carried out by accountancy firm Deloitte for its Q3 CFO Survey. The survey, conducted in September, found that 76% of correspondents favored the certainty provided under the current program, believing that the government should remain within the IMF/European Central Bank (ECB) framework and avail of lower rates and guaranteed funding. The program is due to run for another year.

According to Shane Mohan, Partner in Deloitte, "Remaining in the current program provides a clear path for the country�s businesses to plan ahead for 2013 and discount some of the uncertainty emanating from the Eurozone. In addition, it provides the discipline necessary for the government to continue to lower the deficit towards 3% of GDP.�

The survey also detected a significant increase in optimism amongst Irish CFOs, from a net 0% in Q2 to a net 31% in Q3, in the wake of the agreement with EU partners in July that bank and sovereign debt should be decoupled. Overall, 71% of CFOs believe that the government is having a positive impact on the fiscal stability of the country, while 68% feel that the coalition has had a positive impact on encouraging Foreign Direct Investment (FDI) into Ireland.

However, a major issue remains taxation. 73% of those questioned stated that government policies have had a negative impact on taxation, and Deloitte says there is overwhelming concern about potential hikes in pay-related-social-insurance (PRSI) in the forthcoming Budget. 95% of CFOs argued that PRSI increases would have a negative impact on employment creation, and 85% indicated that they believe businesses will struggle with any additional PRSI rate rises.

Finance Minister Michael Noonan is due to deliver his Budget in December. With 76% of CFOs expressing concern that the Budget will have a negative impact on their businesses, the Budget will be a difficult balancing act for Noonan in ensuring Ireland meets its bailout targets while maintaining business optimism at home.

TAGS: Finance | tax | economics | business | Ireland | fiscal policy | employees | International Monetary Fund (IMF) | tax rates | social security | tax reform | European Union (EU) | Europe

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