Mr. Seamus Coffey:

There is potential for a disorderly or crash-out Brexit, as the Deputy refers to it, to have a very negative impact on the public finances. Our analysis is based on some of the scenarios created by the ESRI and Central Bank on the impact on Irish growth and carrying that through to the impact on the public finances. If there was a dramatic slowing down in the Irish economy, an increase in unemployment-related spending and a drop in tax revenues, the deficit could become significant over a two or three year period and threaten some of the targets and ceilings set out in the Stability and Growth Pact. Equally, we could see our debt ratio, which is currently in a downward projection, change direction. In a very adverse scenario, one could begin to see the debt ratio start to rise again. Some of the benign financial conditions we have seen in recent years could reverse. One thing that has happened over the past number of years is that financial markets have paid very little attention to Ireland. We are small and they simply look at a couple of headline numbers. If one of the headline numbers on which they focused was debt to GDP, they might get a very misleading view of Ireland. If our debt ratios began to start to rise and they were to start to look a bit closer at debt to GNI* not debt to GDP, where the former was heading for 100% and continuing to rise, the benign borrowing conditions of the last number of years could reverse quickly. Not only do we have a large debt to refinance, a hard Brexit could mean a large deficit to finance and the current benign financial conditions would no longer prevail. One of the consequences of recent fiscal policy is that we have not given ourselves sufficient room to absorb the potentially very large shock a hard Brexit could present to the Irish economy and public finances.