The Government has committed more than €20 billion in direct budgetary measures since the Covid-19 crisis broke, according to an analysis published on Friday by the Department of Finance.
This amounted to around 12 per cent of economic output, as measured by GNI* (which strips out the distorting effects of multinationals in the economy), it said.
Some €11.4 billion was accounted for by labour market supports, the pandemic unemployment payment and the wage subsidy measures being the largest source of extra spending.
The Government finances have also been hit by a drop in taxation, which has not been replaced by new revenue-raising measures. Together with higher spending this will push the expected deficit for the year to around €30 billion, which the department says is “in line with international norms”.
Ireland’s deficit will be roughly in line with the EU average, according to the document.
The overall size of the budget package in the latest stimulus plan was €5.2 billion. Adding in the credit guarantee scheme and some other small measures brings the total package to €7.4 billion,
The department’s document, in an analysis of the wage subsidy scheme, says that this is designed to maintain the relationship between employer and employee as well as supporting the finances of firms.
It points to permanent schemes in countries such as Germany, where a Kurzarbeit programme supports employee wages when they go on part-time work for a period.
However, it says in the long-term the State cannot support companies that are not going to be viable – so-called zombie businesses.
Domestic demand
An analysis of the measures sent to members by Ibec, the employers’ body, said they should add over 9 per cent to domestic demand in the Irish economy over the balance of the year. “Taken as a mini-budget it would represent the largest budgetary expansion in recent history,” it said.
In a broadly positive analysis, Ibec said the wage support schemes were important not only because of the pandemic but also because of the risks from Brexit at the end of this year. On its calculations around two-thirds of the additional spending would come on stream this year.
