Mick Wallace (Wexford, Independent)
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Question 71: To ask the Minister for Finance his views on the contention by the Fiscal Advisory Council in the most recent version of its Fiscal Assessment Report that a 1.8% deficit reduction following €20 billion worth of austerity measures illustrates that austerity measures are working to reduce the deficit; if he will acknowledge that the report in fact illustrates that austerity is not working; and if he will make a statement on the matter. [33192/11]

Michael Noonan (Limerick City, Fine Gael)
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As has been set out in the Medium-Term Fiscal Statement (MTFS), Ireland's General Government Deficit is expected to be €16 billion, or 10.3 per cent of GDP, in 2011. In order to bridge this gap between revenues and spending, the Irish State has to engage in large volumes of borrowing. Ireland is relying on external assistance through the EU/IMF Programme for this borrowing. The conditionality of this Programme requires Ireland to reach a deficit of no more than 8.6 per cent of GDP next year. By contrast, the underlying deficit in 2009, excluding the €4 billion capital injection into Anglo Irish Bank, was 11.7 per cent of GDP, so we are on the right path. Based on the macroeconomic and fiscal assessment set out in the MTFS, an adjustment of €3.8 billion is required if we are to adhere to the agreed deficit target of 8.6% of GDP. It is of course extremely important that we continue to adhere to the deficit targets which have been set and that we restore sustainability to the public finances as soon as is practically possible.

Some have called for a higher level of adjustment. Both I and the Government are very conscious of the impact that a larger adjustment would have on economic activity. In striving to restore sustainability to the public finances, we must also be mindful of protecting the emerging economic recovery and seek to strike the right balance between the two. This balancing act is difficult but we believe we have struck the right balance and the EU/IMF troika agrees.

On the issue as to whether austerity is working, CSO data show that the Irish economy expanded by 1.9 per cent in the first quarter of this year and by 1.6 per cent in the second quarter of the year. This is the first time Ireland has recorded two consecutive quarters of economic growth since 2006. So, the economy is growing again and the deficit is reducing. As was acknowledged in the recent MTFS, despite returning to growth, Ireland's economy still faces significant challenges. By continuing with the process of consolidation and implementing policies which will result in sustainable economic growth, these challenges can be overcome. We must also recognise that in the absence of consolidation, the deficit would have grown to levels which would have made debt sustainability even more challenging.