Risk of recession across Europe is a concern, admits Taoiseach

By Aine Fox, PA

A weakening of global markets could affect Ireland’s export performance next year, the Taoiseach has said as he warned of the risk of recession across Europe.

Micheál Martin said Ireland’s economy remains strong, with continued investment by companies and high numbers of people coming to work in the country.

But he said there must be a balance found in order to avoid “a stagflation situation”.

Mr Martin and Finance Minister Paschal Donohoe are in Brussels for the European Council and Euro Group meetings.

Asked how concerned he is about the prospect of recession in Europe, Mr Martin said: “All leaders are concerned and we had informal discussions last evening – similar trends across Europe, everyone concerned about chasing inflation and about adding fuel to inflation. That is a common concern.”

He repeated his forecast that it will be a “very challenging winter”, and said Europe is looking at what common approach it can take in the face of difficulties.

He said: “It’s far more complex than, say, procuring a vaccine, even though that was a major breakthrough for Europe. This is obviously a much more challenging situation given the energy issue and the clear decision of (Russian leader Vladimir) Putin to ramp up the energy crisis potentially for the winter, cutting gas supplies to Germany and other EU states.

“So we are looking at a very challenging winter in terms of the energy crisis, and that will have a follow through in terms of famine and food and that is a concern.”

Asked about the risk of recession, he said: “There’s a risk of recession globally and across Europe but you can’t take that as a given and that’s why this particular period has to be navigated very carefully.”

He added: “If global markets start weakening then that could, potentially, in 2023 affect our (Ireland’s) export performance. There’s no immediate sign of that yet. And if you watched for the last number of weeks, companies are investing in Ireland, companies are continuing to invest in Ireland.

“The census figures reveal that people are coming to work in Ireland in ever greater numbers over the last number of years even through the pandemic, which all reflects a growing economy.”

But he said Government has to “try and get the balance right” to avoid “a stagflation situation”.

There has been increasing pressure on the Irish Government to take more action now to help ease the cost-of-living burden for people.

Mr Martin and other ministers have insisted action must be taken in a “comprehensive way that sustains right through the winter”, arguing that the country cannot be chasing inflation month to month, but rather must look to the longer term.

The Government has rejected suggestions it has been slow to act, highlighting that the steps it has taken to tackle cost-of-living pressures since last October add up to 2.5 billion euro.

Sinn Féin’s finance spokesman accused ministers of having their heads in the sand and repeated calls for targeted measures to help those in need now.

Pearse Doherty said people are “pulling their hair out” at a Government which he said has “made a virtue of the fact that they’re not going to do anything for at least another four months”.

Mr Doherty told RTE’s Morning Ireland programme: “What we’re arguing for is a cost-of-living package that is targeted at low and middle-income earners, that is targeted at renters, that is targeted at families that are paying rip-off childcare, that is targeted at those who are paying through the nose in terms of fuel and home heating oil.”

He said his calls have been backed up by various organisations and those on the front line who are helping people struggling to make ends meet.

A report published by the ESRI on Thursday suggested the Irish economy will continue to grow this year despite forecasts that inflation will average 7.1% in 2022.

The report noted that a strong labour market, “robust” growth in taxation receipts and a “significant” contingency fund set aside in the last Budget, “allows the Government some scope in alleviating higher living costs for low-income households”.