That the economic health of Ireland is heavily dependent on economic conditions in the U.S. is a given. So it is hardly surprising that the Irish government is keeping a very close eye on the current volatile indicators on this side of the Atlantic – indicators that some say are pointing to a second “double-dip” recession.
Finance minister Michael Noonan, reacting to the ups and downs on Wall Street and all the talk of recession, gave voice to his government’s unease last week when he said that the government was “very concerned” that ongoing economic turmoil in the U.S. could prevent an Irish recovery.
“We would be very concerned about a further dip in the U.S., because the U.S., I believe, will still lead a world recovery supported by emerging nations like China and India. That’s worrying,” Noonan said.
The Irish Examiner reported that under the terms of the Irish bailout deal, the government was obliged to make savings of at least €3.6 billion in the budget in order to reach deficit-reduction targets.
Asked if a U.S. slump would require an even harsher budget to meet those targets, Noonan replied: “It’s too soon to say what the consequences of what’s happening in America will be, because there are some positive signs in the American economy as well, and a lot of commentators would disagree that there’s a double dip recession in prospect.”
The Irish government, Noonan continued, was obliged to reduce the deficit to 8.6 percent of GDP in the budget.
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“Now, whether we can get there on €3.6 billion, or slightly more, is not clear yet,” he said.
Noonan, according to the Examiner report, said that Ireland was “reasonably well-positioned” since the renegotiation downward of the interest rate and the other changes in the terms of the ECB/IMF bailout.
“But we’re always a small player in these events and we can be dragged back into difficulty by external forces,” he said.