CALL FOR DEEPER BUDGET CUTS IS 'RECKLESS'

12 Oct 2011

Congress has described as 'reckless' the proposal from the Irish Fiscal Advisory Council that Government should impose deeper cuts in the forthcoming budget.

According to Congress Chief Economist Paul Sweeney, the call for deeper austerity at a time when this policy was clearly failing was "reckless and could threaten a possible recovery."

"The Council's obsession with debt reduction ignores the impact of the €21bn austerity adjustment to date. The deficit in the demand for labour - and not the financial deficit - is what we need to prioritise.

"The recent small increase in volatile GDP and the small increase in GNP give no comfort to those working in the real economy and even less to those who are out of work," Mr Sweeney said.

"Domestic demand fell substantially in Q2 of 2011. And this is on top of a staggering fall of 25% in domestic demand over the past 3 plus years. We have had too much austerity and it is not working. We need to significantly moderate our budgetary plans and invest for growth."

Mr Sweeney pointed to a new study by Laurence Ball of John Hopkins University and two IMF staff members, which warned that austerity damages income and jobs.

"It found that the pain is not shared equally - wage earners are hurt most. For example, their model found that wages fall by 0.9% with each 1% cut in GDP, whereas profits and rents fall by only 0.3% and they recover faster!

"These proposals will damage jobs and prospects for growth," Mr Sweeney said.