THE CENTRAL BANK has today published an economic letter, entitled ‘Fiscal Compact – Implications for Ireland’, which outlines the long-term implications for Ireland as a result of the fiscal compact.
The letter states: “Although the projections set out in the Letter demonstrate that fiscal targets remain on track to 2015, many uncertainties prevail.”
Findings confirm that uncertainty around these fiscal projections is high.
Despite this, the Central Bank believes that the government’s commitment to the EU-IMF targets for 2015 should be adhered to.
These ‘future fiscal paths’, however, ’depend jointly on policy decisions taken to date and potential exogenous [external] shocks to the economy.’
Making reference to the ‘structural balance of -0.5 per cent of GDP (the Balance Budget Rule) as required under the Fiscal Compact’, the Central Bank believes that this can be ‘achieved by 2020’.
This belief, however, comes with the following caveat:
This paper does not comment on how much of this necessary correction originates from the benefits of past structural reforms undertaken, relative to how much would need to come in the form of additional consolidation efforts.