THE FORMER HEAD of the International Monetary Fund’s mission to Ireland has said that Ireland needs “a new jolt of growth”.
Ashoka Mody, who has previously said that the austerity-only policy for Ireland was a mistake, has said that the current economic problems in this country are linked to a lack of consumer and State spending.
“I’m afraid we are already five years into the crisis and with households continuing to try to catch up with their lost wealth, they are not spending,” he told RTÉ’s Prime Time.
“If the Government and households are both not spending, it’s not a surprise that the economy is not growing.”
Mody said that there is “no clear end in sight” to austerity with at least two more years of it planned and said that the State needs “a new jolt of growth”.
“Ireland’s growth has been very disappointing over the last 12 months or so not withstanding ups and down of an episodic nature,” he said.
He warned of a there is a danger that Ireland will “go into a long term hysteresis process” from which it will not emerge easily, referring to the lagging of an effect behind its cause. In economics ‘hysteresis’ is a term commonly applied to the area of unemployment.
Mody’s comments come in the context of the Budget which is planned for October 15. The two coalition parties are focusing on how much of an adjustment will be required.
While many of those in Fine Gael and Ireland’s Troika bailout partners are seeking €3.1 billion in cuts and tax rises, Labour is pushing for something closer to €2.5 million.
Speaking on Morning Ireland, independent TD Stephen Donnelly argued that the €3.1 billion plan exceeds the Troika target by €1.3 or €1.4 billion and argued for a billion euro less in austerity in next month’s Budget.