Outlook is grim but "we can still avoid a recession" says Paschal Donohoe 1 month ago

Outlook is grim but "we can still avoid a recession" says Paschal Donohoe

The Finance Minister has admitted that a Europe-wide recession is a risk, though he's sounded a note of optimism.

Minister for Finance Paschal Donohoe has acknowledged the dreaded 'R' word as a grim forecast for the economy of Ireland – and wider Europe – comes into focus.

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Donohoe was speaking in his capacity as President of the Eurozone countries prior to addressing an EU leaders’ summit in Brussels on Friday (24 June).

Minister Donohoe admitted that all 19 countries that use the Euro currency are at risk of an imminent recession, though he also stated his belief that such an eventuality can be avoided.

"Yes we can [still avoid a recession]," he told Bloomberg News.

"The changes that we are seeing taking place in economic performance are to be expected – all of these changes were acknowledge as risks by ministers, by the commission, by the ECB, and what we'll be doing today is reviewing the steps that can be taken, how we can implement a recovery plan within the European Union to support those economies who need the support the most, and then how we can have the right overall budgetary policy for the Euro area in 2023.

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"So, it is a risk, but yes, we can avoid it."

Reminded of "real concerns" associated with various ongoing crises and faced with the prospect of a "perfect storm" about to hit Europe, Donohoe pointed to a current record level of employment within the EU and the implementation of a recovery fund for those in urgent need.

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"We will take a decision regarding a coordinated budgetary approach for next year," he added. "We can put in place other sources of economic momentum to help us offset some of the challenges that we now know are coming."

Regarding an Irish-specific budget, Donohoe, Taoiseach Micheál Martin and Tánaiste Leo Varadker provided some indication of what that might look like earlier this week.

"The forthcoming Budget will be a cost-of-living Budget, and what we do has to be comprehensive," the Taoiseach told RTÉ News, adding that "a difficult period lies ahead" for the Irish economy.

Varadkar, meanwhile, signalled an intention to raise payments in the areas of social welfare, pensions, childcare and beyond.

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"I think it stands to reason that the pension increases and social welfare packages will have to be greater in 2023 than they were this year," he said on Monday. "That's only right. The cost of living is rising and the economy's in good health.

"We’ve got more people at work than ever before. Trade is breaking records and the public finances are in pretty good nick. So, you know, when the Government can protect people’s living standards, it should seek to do so."

Tánaiste Varadkar also underlined that "investing in childcare makes sense now and for the long-term".