Ireland should apply for a precautionary aid program as part of its bailout exit strategy, Goodbody Stockbrokers said this week.
In its quarterly economic commentary, Goodbody, Ireland’s longest-established stock broking firm, warned that while the country was on track to exit the troika program later this year, significant vulnerabilities still existed.
It cited the banking system and the rejection last week of the public sector pay deal in Croke Park II as examples of potential “banana skins” which could frustrate the country’s economic progress.
Despite the deteriorating economic outlook in the euro area, Goodbody kept its GDP growth forecasts for Ireland unchanged at 1.6 percent for 2013 and 2.6 percent for 2014.
“Ireland has displayed great discipline in implementing the EU-IMF bailout program in recent years,” Goodbody economist Dermot O’Leary said. “It is critical now that we manage our exit from the bailout in an appropriately prudent manner.”
Meanwhile, Jack O’Connor, President of SIPTU, Ireland’s largest union which voted down Croke Park II last week, proposed a higher rate of tax on those earning over €100,000 as part of an alternative approach to achieving the savings contained within Croke Park II.
O’Connor said the government could also choose to factor in savings from the promissory notes agreement to alleviate the level of cuts required in 2014.
O’Connor outlined his ideas in the latest edition of the Liberty newspaper, which is produced for the union’s 62,000 members.
He said there were a number of alternative methods to finding savings following the rejection of Croke Park II.
He said there was a common belief, especially among public sector workers, that lower-paid workers had been forced to shoulder the lion’s share of the debt burden, while higher-income workers had not been hit as hard.
He did not believe a new tax on incomes above €100,000 posed a risk to international businesses in Ireland.
Earlier this week the president of the U.S. Chamber of Commerce, Thomas Donohue, said increasing taxes on high earners could lead to an exodus of international firms.
A separate report says the government will have to raise the future retirement age past 68 with mandatory enrolment in private pension schemes if it is to ensure sustainable, equitable cover into the future.
The Organization for Economic Cooperation and Development (OECD) said Ireland’s position on the pensionable age may not go far enough. It is currently 66, and is due to rise to 67 by 2021 and to 68 by 2028.
John Martin, principal author of the report said, “It may be necessary to envisage further increases in the state pension age beyond 68 if we are to really bed in financial sustainability.”