Professor John McHale:

In one sense, that partly explains the way we come at the issue. It is a difficult balancing act to determine what the appropriate budgetary policy is at a particular point in time. There certainly can be good reasons for running deficits. There can be good counter-cyclical reasons if the economy is in recession. One may want to run a deficit now and pay it back later with interest. If one has extraordinary costs, as we have had during the crisis, again, there is a good reason to run a deficit, but then there are reasons to run smaller deficits as well. For instance, we face major demographic pressures from an ageing population and good fiscal policy would indicate that if one did not have other constraints, one should probably be running surpluses to prepare for that. We also still have very large debts and in a very fragile global economy, that leaves us vulnerable. Putting everything else aside, the appropriate policy would be to try to get the debt down to get us into a safer position. When we try to identify the appropriate fiscal stance, recognising the budget constraint the Government faces over time, we are trying to balance those factors.

Reference was made to the strong, recent economic performance, but that cuts both ways. On the one hand, it makes it easier to hit the fiscal targets. On the other hand, the actual case for a counter-cyclical stimulus is lessened somewhat. At the moment, even though there are questions about the recent growth figures in terms of what they really indicate about the strength of the economy, taken at face value, we are growing beyond the underlying potential growth rate of the economy so that, from a counter-cyclical perspective, lessens the argument for more stimulus. It is a balancing act. Putting politics aside, but recognising that ultimately what matters is the interests of the Irish people – not just now, but in the future – one has to balance those factors. Recognising the risks that result-----