Professor John McHale:

Starting with the more indirect consequences, it would be a blow to the credibility that has been hard won. We have met all the targets to this point and if we were seen to pursue policies that lead us to start missing the targets in the first budget post-troika, much of that credibility would be undermined, particularly the ability to follow an appropriate fiscal policy outside an official assistance programme.

The potentially more direct consequences could be sanctions from the European Commission. Getting the deficit below 3% of GDP is enough to get out of the excessive deficit procedure. If we miss that target the Commission will do an analysis of what it calls effective action to see if we pursued the right policies but ended up missing the target because of a bad outcome on economic growth. Where we have pursued what it views as effective action, it can extend the target so the consequences are not all that severe. If we are viewed not to have taken effective action, the sanctions process could begin, initially leading to a fine of approximately €300 million, which is significant. Going through that sanctions process would be very damaging to credibility and is certainly something that would be much better avoided.