‘Securing the Recovery’ “The Road Ahead: Ireland in 2020”

We have travelled a long and hard road together but the journey has not been in vain. The recovery is well underway, the public finances are under control, the economy is growing strongly and, most importantly, jobs and opportunities are being created. In four short years we have turned the country around.

The strategy pursued by Fine Gael and our partners in Government, the Labour Party, have delivered for the Irish people. When we sat down to negotiate the Programme for Government in 2011, fixing the economy and creating jobs was the priority.

I am pleased to say that we are much further advanced in this task today than I envisaged at that time. Ireland is now the fastest growing economy in Europe, over 80,000 jobs have been created and the era of austerity budgets has been brought to an end. Confidence has returned to our shores – our people have confidence to invest and plan for their future with positive expectations. We must not be complacent and there will be many bumps on the road ahead. But there are also many opportunities and potential for growth and job creation:

· Full employment;
· strong, sustainable economic growth;
· a well-functioning, healthy financial system;
· a balanced budget;
· a gross debt to GDP ratio in double digits, continuing downward and in line with EU averages

are all achievable goals over the next five years.

So as we look forward and plan for the future my overriding goal is to ensure that the decisions we take deliver on these objective and Ireland’s full potential is achieved.

Growth
The economy grew by five per cent in 2014 and growth of four per cent is expected in 2015, the highest growth rates in the EU in both years. We have a young, dynamic and skilled population, and our capacity to grow in the future remains strong. With sensible and prudent management of the economy and public finances, the opportunity now exists to secure solid growth of between 3% and 4% for the remainder of the decade.

This growth is delivering jobs and we are now seeing employment growth in virtually all sectors across the economy. The unemployment rate has fallen steadily – by 4.5 percentage points – in just three years. Forecasts now show unemployment falling below 10% this year and some economists are forecasting unemployment to drop below 9% in 2016. Full employment within the next three years is an achievable goal.

The public finances are under control and the deficit will fall below 3% this year and a balanced budget is within sight. The debt levels, while high, have peaked, are on a downward trajectory and, with borrowing rates at record lows, is sustainable. Through negotiation we have delivered interest savings of over €10 billion. We have also reduced by €20 billion the amount of money the State will have to borrow over the next decade or by extending the maturities on our European loans.

The blight of the banking guarantee introduced in 2008 is evident in our debt and the €34 billion that Fianna Fáil injected into Anglo Irish Bank will never be recovered. But we have reduced the burden of this dramatically by liquidating the banks and replacing the promissory note with a cheaper, funding model. You will recall that the original scheme involved the State borrowing over €3 billion each year to service the promissory note. This deal we negotiated removed this requirement and reduced by €20 billion the amount of money the State will have to borrow over the next decade.

However, the money that this Government put into the banks will be recovered fully. The value of our shareholding in AIB, Bank of Ireland and Permanent TSB continues to grow and over time we will recoup the full cost of the taxpayer’s investment in these institutions and use the proceeds to further reduce the debt.

When the benefits of Budget 2015 appeared in their January pay packets, every worker in Ireland knew that the era of austerity was over and we were entering a new phase for Ireland. As committed to in the Budget, we will continue this approach in Budget 2016 and, if re-elected, in the Budget 2017. Unlike many members of the opposition, Fine Gael is not proposing higher taxes and we will not load higher taxes on work. Lowering taxes on work in a strategic and targeted way will not only benefit every worker in Ireland, it will also create jobs. The three year tax reform plan set out in the Budget will deliver 15,000 new jobs in Ireland.

When people think about budgets they think lower tax rates, reducing the universal social charge or raising child benefit. From my perspective as Minister for Finance, the Budget is part of a much broader strategy to manage the economy for growth and job creation. The strength of our exporting sector that has led the recovery is now being supported by increased demand in the domestic economy.

With the recovery in the UK and the USA strengthening, the outlook for the exporting sectors in the years ahead is very positive. We are also well positioned to benefit from any pick-up in growth in that will come in the Eurozone.

There is little we can do to manage external demand, but there is much we can do to ensure that the public finances are stable and well-managed and the domestic economy is supported. The mildly expansionary 2015 budget was designed to broaden this recovery in the domestic economy and put €1 billion back into the Irish economy. This supports demand in the domestic economy as the customer of the small businesses, shops, pubs and restaurants in every town and village in Ireland now have a small bit more money to spend. SME’s are the lifeblood of the Irish economy and must be supported. In addition to the Budget measures just this week the Strategic Banking Corporation of Ireland was launched. This state backed bank will provide cheaper and more attractive funding options for Irish SME’s.

The reduction in energy prices and the actions of the ECB are further welcome boosts. Falling fuel prices at the pumps has matched the tax reductions in the budget and again results in additional spending power into the economy. The ECB’s quantitative easing programme launched last month is a big boost for Irish exporters and will keep downward pressure on interest rates; again improving domestic demand.

On the economic front it is clear to me that the opportunities outweigh the risks. It is important that policy over the medium term continues to be sensible and prudent. Because Ireland is vulnerable to the vagaries of international economic developments, fiscal policy will always have to reflect this reality.

In April, the Irish Government will set out its first Spring Economic Statement – SES – alongside the Stability Programme Update. The SES will specify the priority policy measures which will be central to the overriding objectives of underpinning sustainable economic growth and generating employment.

A key pre-condition for economic stability is fiscal stability.

Over the last number of years we have been guided by a binding European ceiling. The target – a deficit below 3% of GDP – was easily measurable and well understood. Over the medium term, a different set of European rules will apply.

We must ensure that the fiscal strategy is in line with these rules but, most importantly, is appropriate for Ireland.

This means keeping expenditure growth in line with underlying growth in the economy, investing strategically and though innovate mechanisms in our infrastructure and ensuring that the tax system remains growth-friendly.

It also means achieving a balanced budget to keep our debt ratio on a firm downward path.

Conclusion
The opportunity now exists to secure and broaden the recovery, balance the budget and deliver full employment. The opportunity to consign the boom and bust model that has so spectacularly failed the Irish people to history.

The Irish economy had a good year in 2013 and a better one in 2014, and this was no accident. Things are going right because we have not been afraid to do the right things.

The prospects for the Irish economy in 2015 and beyond look good, but there are risks and continued effort, discipline and prudent management is required to make these prospects a reality.

Securing the recovery means building on the strategies that have delivered to date. We know where we want to be in 2020. We have set out goals for the economy, for employment and for the public finances for that year and are implementing the policies to achieve them.

These goals are credible and achievable.