Dr. Stephen Kinsella:

I echo Mr. McCarthy's comments on the value of having independent agencies that produce analytical work to this level of quality. It is a highly valuable thing. The report cannot be dismissed as mere grumbling, because it is IFAC's function to sound these alarms. I would like to see a formal reply from the Department of Finance setting out why it believes its assumptions to be credible. I have not seen this to date. Having gone through the report very carefully, IFAC's arguments look valid but we have not seen a reply from the Department of Finance, or at least I have not read one, to say why the council is wrong. That is a very important point.

The notion of a fiscal space is mandated by the European semesterisation process. However, having experienced it for five years, I am of the view that it is nonsense. Suddenly, when needed, €1 billion gets found down the back of the couch. It is not an actual constraint on our behaviour, as a polity, and that is not a good thing. If we are to compute these things and talk about them seriously, the first thing that we must do is assess the level of credibility of the budget envelope. One thing that I would seek from the Department of Finance in the future - I will discuss this at the national economic dialogue tomorrow - is this precise function. We need to debate our assumptions a little, particularly as we move into a very uncertain time. There will be a period in the future when even computing these things for a small open economic will not be that credible. Forget about whether the amount of money coming in matches the forecast, we must recognise that the forecasting methodology for a small open economy probably will not be right. We are being forced to treat the Irish economy the same as the German economy which is just nonsense. For those two reasons, I would like to see a much healthier dialogue between IFAC and the Department of Finance. Currently, it seems to be the case that the dog barks and it is ignored. I would like there to be some sort of conversation.