Belfast Telegraph

Friday 1 August 2014

Nation 'is set to rebound rapidly'

EU commissioner Olli Rehn believes Ireland will bounce back rapidly from its current economic woes

Ireland will rebound "relatively rapidly" from its current economic woes, Europe's commissioner for economic and monetary affairs Olli Rehn has predicted.

"The Irish are smart, resilient and stubborn people: they will get over this challenge and the EU is supporting them in that," said Mr Rehn.

He was speaking a day after approval of an international 85 billion euro bail-out designed not only to buck up the Irish economy but also to revive the euro's reputation and stave off the further speculation involving weaker euro economies.

Mr Rehn, presenting his autumn economic forecast in Brussels, said the measures taken by the EU and the International Monetary Fund to prop up Ireland showed that "we will do whatever it takes to support financial stability in Europe. But, as always, restoring confidence takes time."

His country-by-country economic report, prepared before the bail-out was in place, says Dublin's four-year recovery strategy "clearly sets out plans to consolidate the public finances", but warns: "The pace of recovery will also depend on the speed of correction of other imbalances accumulated in the past". The report says Ireland faces "painful but necessary adjustment to facilitate gradual recovery" and forecasts an increase in national wealth (GDP) of 0.9% next year, compared with a 0.2% decrease this year.

In 2012, the report suggests, Ireland should see a 1.9% rise in GDP, but the report cautions: "The forecast assumes progress in the domestic rebalancing of economic activity, from construction to more productive sectors, in the clean-up of household and corporate balance sheets as well as further regaining of competitiveness."

Mr Rehn commented: "Ireland has hit a very deep economic recession resulting from the financial crisis, which hit Ireland because of its credit boom and real estate bubble. But the economy will face up to serious challenges. Ireland has a flexible and open economy which is capable of rebounding relatively rapidly from this recession."

The commissioner added: "It is encouraging for Ireland and for the whole of Europe that Ireland has such support (from the EU). The Irish are smart, resilient and stubborn people. They will get over this challenge and the EU supports them in that."

For the UK, the report says recovery is gaining momentum, with growth in the second and third quarter of this year "well above trend". But it adds: "However, although a return to recession seems improbable, the impact of fiscal consolidation (budget cuts), coupled with a fading of temporary factors which have contributed strongly in 2010, make it unlikely that growth will remain this high for very long".

GDP growth of 1.8% this year should rise to 2.2% next year and to 2.5% in 2012, compared with an expected average EU GDP growth of 1.7% next year and 2% in 2012. In general, said Mr Rehn, recovery is under way, but with "uneven" progress across the EU.

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