Speech on Stability Programme Update

23rd April, 2020

Ceann Comhairle,

Before I begin, I would first like to offer my condolences to those who have lost loved ones as a result of the Covid-19 pandemic.

I would also like to pay tribute to our frontline public servants, healthcare professionals, carers and shop workers.  

Additionally, I want to acknowledge the remarkable solidarity shown by the vast majority of Irish people towards their own family, friends and neighbours, but also towards strangers and the broader community as a whole, over the past number of weeks. 

I welcome this opportunity to present the Stability Programme Update to the House today. 

The Government has a legal obligation to provide the European Commission and Council with an update of its economic and fiscal position in April every year.

As is normally the case, the Stability Programme was published in draft form. 

This is to allow Dáil Éireann an opportunity to discuss and debate the document before the Government formally submits the final version to the European authorities at the end of the month.

We have kept our assessment to the current year and next year. 

There is simply too much uncertainty to do otherwise. We have presented a scenario.

The economic projections set out in the Stability Programme have been endorsed by the Irish Fiscal Advisory Council; again, this is a legal requirement.


The discussion of our public health and economic status is honest about our status today, but also honest about our future prospects, and about what we can achieve.

We can and will renew the economy of Ireland, when we have recovered our public health.

But, we are now in the midst of a severe recession, both globally and domestically. 

For Ireland, my Department is expecting Gross Domestic Product to fall by 10½ this year. 

This scenario rests on the assumption that the current containment measures remain in place for about three months – covering most of the second quarter of the year – and are incrementally eased thereafter. 

Recovery in the second half of the year is, accordingly, steady while behavioural changes on the part of firms and households mean that the level of economic activity will be below what would have been the case had there been no pandemic.

Ceann Comhairle, we are now considering a U-shaped recovery.

Jobs, and our people, have borne the brunt of the unprecedented economic decline. 

In the space of a few weeks, our labour market has been turned on its head: transformed from a position of full-employment to one where unemployment has risen at a completely unprecedented speed and scale. 

As highlighted yesterday, the unemployment rate could hit 22 per cent in the second quarter of this year, having been just 5 per cent or so as recently as January.

But, let me again emphasise – we can and will recover.

Our economy can grow again next year, employment can grow, unemployment can fall, and our public finances can improve.

This is because, as the experience of the last financial crisis and Great Recession shows, our economy and labour market are very resilient and have real underlying strengths that this crisis will not have altered.

In particular, the internationally traded sectors of our economy like technology, pharmaceuticals and medical devices have shown themselves to be highly resilient during the current crisis.

Moreover, we have entered recession because of a health crisis – not because of imbalances or mismanagement of the economy. 

In fact, none of the imbalances that characterised our economy previously – credit growth, borrowing from abroad through a balance of payments deficit – are evident at present. 

Household and corporate balance sheets are in a much better position than a decade ago – at least at an aggregate level.

So once the pandemic is contained, we are in a position to recover well.

The gradual recovery assumed in the second half of the year is projected to gain momentum next year, with the economy growing by 6 per cent

We expect economic activity to reach its pre-crisis level in 2022

A central focus of our recovery effort will be getting as many people back to work as the public health situation allows.

We want to make the recovery a job rich one like the recovery from the financial crisis and we will ensure that the right policies are put in place to deliver this in the context of a fundamentally different ‘new normal’ in our economy.

Indeed, for next year, we project that employment will grow by 5½ per cent- in other words an additional 115,000 jobs and that this will reduce the unemployment rate to below 10 per cent.

Our strong labour market has been the engine of our economic success in recent years.

We are determined that this engine will once again be able to provide a job for everyone who wants one as we move into the post-Covid 19 era.


Ceann Comhairle, I will now turn to the budgetary situation.

In budgetary terms, the responsible manner in which we have managed the public finances means that we are in a position to absorb a short-term increase in borrowing. 

As you know, we achieved a surplus of 0.4 per cent of GDP last year. It would have accelerated considerably this year.

We also set up a Rainy Day Fund and we have been steadily reducing the debt ratio. 

This is the foundation of our ability to respond now.

For this year, a sharp deterioration in the public finances is now expected, with a general government deficit of €23 billion, or c.7.4 per cent of GDP. 

This projection is based on policy decisions already made, it excludes those yet to be made.

If economic recovery is delayed, this could be as large as €30 billion, about 10 per cent of GDP.

However, in the event that we can recover as projected in the SPU, with the economy growing at 6% next year and the fundamental strengths of our labour market driving strong job growth, then we will be in a position to reduce the deficit.

The deficit arises from a combination of discretionary measures – supporting households and firms and expanding healthcare capacity – as well as the gap left by falling tax revenue.

This is entirely appropriate. 

Government is using budgetary policy to cushion the blow of this extraordinary crisis. 

The very reason we run surpluses in the good times is to ensure we have the resources available to us in the bad times, such as those we are experiencing now.

The SPU allows for an increase in expenditure of €8 billion on previously announced figures to account for measures taken in response to the Covid-19 crisis and also to fund income supports over the second half of the year.

In particular, almost €2 billion is to be provided to support the Health service to boost capacity, purchase PPE and hire new staff. 

To support people through this crisis, the measures agreed by Government will, over a 12-week period, provide at least c. €4 billion to €4½ billion in income supports, sick pay and illness benefit for impacted workers. 

The additional funding has been provided based on current projections and will be revised to reflect and take account of the changing public health position.

The debt-to-GDP ratio is forecast at 69 per cent, an annual increase of 10 percentage points.  

Meanwhile debt-to-GNI* is projected to increase to at 125 per cent for this year.

To put the Irish budgetary figures in context, the IMF is projecting that the euro area average deficit will be 7.5 per cent of GDP this year; and that the average increase in the debt ratio will be 13 per cent. 

So the budgetary position in Ireland is firmly in line with the norm for advanced economies responding to this crisis.

The European Council has agreed to activate the so-called ‘General Escape Clause’ of the Stability and Growth Pact

This will suspend the fiscal requirements under the preventive arm of the Pact. 

However, an Excessive Deficit Procedure could still be launched at a later stage, as the deficit limit is enshrined in the Treaty on the Functioning of the European Union. 

Most – if not all – EU Member States will be in this position.

In terms of repairing the public finances, economic recovery can drive most of the improvement. 

Growth will boost tax revenues and reduce unemployment, both of which will benefit the public finances.

Furthermore, if the right decisions are made at international levels, we can avoid the pain of the last crisis.

However this does not mean that we can do everything.

Our deficit will have to be reduced, our national finances must return to a position of balance. Again.

The daily debates about making choices within limited resources that existed before this crisis will of course endure after the crisis has passed.

What we value and prioritise and how we pay for it will continue to be a central debate of democratic politics.


Ceann Comhairle, we will need to borrow to fund our deficit this year and next. 

The situation is currently favourable. 

The NTMA had approximately €22 billion of cash at end-March. 

Part of this was used to re-finance the €11 billion bond that matured this week. 

An additional bond – around €6½ billion – matures in October and there are a small number of bilateral loans that mature this year.

The NTMA will also finance the Exchequer deficit of €15 billion, partly with cash balances and with new financing, both long and short-term.

The NTMA has also announced its revised 2020 bond funding range schedule for borrowing. 

Importantly, we can borrow at less than 0.5 per cent (10-year money) at the moment. 

I also note that there are no bonds maturing next year, which gives us important pace.

The State is in a strong position to fund the deficit that has developed.

Equally, it will be essential that as our economy improves, so do our public finances.


To conclude, let me be unequivocal.

Ireland will recover from this crisis.

We will come out the other side of it.

We have the economic and social capabilities that will pull Ireland through.

This Government, the next Government, and this Dail can and will make decisions that will get our citizens back to work, that will re-open small businesses, and that will get trade flowing again.

And we will be stronger, more resilient and have greater capacity as a State to meet the needs of our society as a result.

That recovery will take time, determination and significant resources.

It will involve many difficult decisions. But, we will rebuild our economy.

When you consider the alternative to the measures we have undertaken to-date, you quickly realise that there is no alternative to a caring society.

The Government acted quickly and decisively in the interest of all of our people.

I have made the point on many occasions that I am the Finance Minister of an economy within a society not a society within an economy. 

As seen over the past few weeks, Ireland is always more than just an economy.

It is a society. 

The Stability Programme Update provides the backdrop against which decisions to protect and renew both will be made.