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Taoiseach says Ireland will not be able to borrow cheaply forever

Leo Varadkar says Ireland cannot run larger deficits than other EU countries.

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Leo Varadkar is wary that low interest rates will not last forever (Photocall Ireland/PA)

Leo Varadkar is wary that low interest rates will not last forever (Photocall Ireland/PA)

Leo Varadkar is wary that low interest rates will not last forever (Photocall Ireland/PA)

Taoiseach Leo Varadkar has said Ireland does not need to be the “best boys in the fiscal class” but warned against the State borrowing money for a long time.

Mr Varadkar said the State can currently afford to borrow at low interest rates to help the economy recover from the severe shock it faces due to coronavirus.

But speaking in the Dail on Thursday, he said it would be naive to think economic circumstances are not liable to change quickly in the weeks ahead.

“There is no such thing as free money, any debt has to serviced and interest has to be repaid,” he said.

“We should not make the mistake of assuming that we because we can borrow cheaply now, we will be able to borrow cheaply in six months’ time or a year’s time.

“The world has changed so much in the past six months and we would be naive to think it would not change again and quickly.

“If conditions do change, the countries with the biggest debts and largest deficits will be the first to feel the ill winds.”

He said while Ireland will run a deficit of more than 30 billion euro this year, any money that is borrowed will need to be repaid.

There is no such thing as free money, any debt has to serviced and interest has to be repaidLeo Varadkar

And he added while Ireland does not need to be “the best boys in the fiscal class”, it cannot run larger deficits than other EU countries.

“We should seek to a deficit similar to those of our peers in northern Europe,” he said. “Not much larger ones. This is a sensible, sustainable thing to do.

“We will use this borrowed money to provide income support for those who’ve lost their jobs, to get businesses open again, provide retraining and educational opportunities for our fellow citizens who are now without employment.”

He said the Government stands over the ‘slow and steady approach’ when it comes to leaving lockdown.

On Monday, the first phase of the lockdown easing was implemented with the return of construction and outdoor workers.

Mr Varadkar said we will not know until the first week of June whether the easing of restrictions has had any impact.

“I know that some other countries are opening faster, but every country’s circumstances are different,” he said. “We stand over the slow and steady approach.”

He said the Cabinet will decide on June 5 whether Ireland moves to phase two of its road map, on advice of the National Public Health Emergency Team.

PA