Pearse Doherty (Donegal South West, Sinn Fein)
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34. To ask the Minister for Finance if his attention has been drawn to the recent comments by Nobel Prize winning economist Joseph Stiglitz that Ireland is facing a lost decade and that austerity never works and his assertion that the cost of bailing out European banks has been paid by Irish citizens; and if he will make a statement on the matter. [49199/13]

Michael Noonan (Limerick City, Fine Gael)
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The deterioration in Ireland’s public finances from 2008 was driven by a number of factors including the banking crisis. While significant debt was accumulated as a result of financial sector support, large underlying primary deficits (that is, the deficit net of interest payments and financial sector support) have been recorded in every year in Ireland since 2008. These deficits were as a result of both an over reliance on construction-driven revenue which resulted in a large hole in the public finances when the property market collapsed and through increased public expenditure including on income supports. A credible fiscal adjustment strategy was required to ensure that debt was not put on an unsustainable path. The Government fully recognises the negative short term effect on output that fiscal consolidation has and that it is a difficult balancing act between the need for consolidation on the one hand and the need to support the emerging recovery on the other. However, I believe we are getting the balance right.

Through the fiscal adjustment measures that the Government has implemented, stability has been restored to the public finances, the economy is growing and jobs are being created. Having met and exceeded all of our deficit targets to date, we remain on track to bring our deficit below 3 per cent of GDP in 2015. A second consecutive year of growth was recorded in 2012 and the economy is predicted to grow at a modest 0.2 per cent this year. Employment grew by 1.8 per cent in the second quarter of 2013. In line with these developments, the Live Register based unemployment rate continued to fall to 13.2 per cent in October, having peaked at over 15 per cent in early 2012.

Irish sovereign yields are now at about 3½ per cent, a fraction of the highs of nearly 15 per cent reached in summer 2011. This is due in no small part to successful re-negotiation of the terms of the EU-IMF programme and the promissory note deal, as well as the overall confidence in the future of economic and monetary union. However, the improvement in yields is also down to the Government’s fiscal strategy which has seen the consistent deficit reduction. A reduced cost of borrowing for the Government reduces the interest bill which has to be paid by the taxpayer, and, over the long term serves to keep economy-wide interest rates low in order to stimulate investment. On foot on this progress and prudent debt management policies, Ireland’s debt ratio is now expected to decline in 2014 and remain on a downward trajectory thereafter. Budget 2014 also forecasts a modest primary surplus next year. This means that, excluding debt service costs, revenues are sufficient to meet expenditures.

On the issue of the cost of the banking crisis, I would ask the Deputy to note that the State has already recovered a significant portion of the cost of financial supports provided to the Irish financial sector with almost €10 billion recovered to date. This has come from many sources including the disposal of ordinary shares in Bank of Ireland to private investors, the sale of contingent convertible notes that had been issued to the State by Bank of Ireland, the sale of Irish Life, coupons received on preference shares and contingent convertible notes, and fees received under both the Credit Institutions (Financial Support) Scheme and the Eligible Liabilities Guarantee Scheme.