Paschal Donohoe rejects claims economy is overheating

Finance Minister Paschal Donohoe has rejected European Commission concerns that Ireland’s economy is at risk of overheating, claiming the country will have more jobs than people available to work them next year.

Speaking at the National Economic Dialogue conference in Dublin Castle as it emerged an unpublished European Commission report has warned the Government not to cut USC due to the risks this poses to the economy, Mr Donohoe said Ireland’s finances are in a healthy position.

Asked about the European Commission’s latest post-bailout programme surveillance report’s warning that scrapping USC and a series of other Government plans risk overheating the economy, Mr Donohoe said the recovery is firmly in place.

He said any changes will take place in the existing fiscal parameters. “The first step in all of this is to gain a further appreciation of where our prospects for this year. When we are clearer on that, that will allow us to be clearer on resources that are available for 2018,” he said.

“The [Irish] Fiscal Advisory Council chairperson, Seamus Coffey, said today that in their reports they are saying we are not seeing overheating in any key markets at the moment, particularly in our employment market and in our housing market. But what they did raise is the vista that if certain trends, particularly in our labour market continue into 2018 the way they have in 2017, then we might get to a point next year that we have more work in our economy than we have people to do it.”

While just under 275,000 people are on the live register in Ireland, Mr Donohoe’s claim is believed to be based on the fact that a large number of specialised IT, construction and other sectoral jobs may be created next year, with not all positions being able to be filled by existing workers.

However, the suggestion is likely to be criticised by groups who have repeatedly warned that the Government’s widely stated recovery has yet to spread to all parts of the country, with hundreds of thousands of people seeing little, if any, change in their economic fortunes since the official end of the financial crash.

Meanwhile, Mr Donohoe says he agrees fully with Taoiseach Leo Varadkar’s plans to potentially cut income tax levels in the next budget, despite criticism this could result in a hollowing-out of the tax base. He said any changes will be focused on sustainable, long-term improvements for the State.

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