Updated Fri 4:53 PM
Lauren Boland reports on the Brussels European Council
Additional measures to tackle the cost of living are unlikely to materialize before the 2023 budget, the Taoiseach reiterated.
October’s new budget will be central to the government’s efforts to try to mitigate increases in the cost of living, Micheál Martin said today, although Tánaiste Leo Varadkar said earlier this month that he “did not rule out” other measures by then.
Eurozone countries gathered in the Council of the EU today to discuss their current economic situation as rising inflation put leaders on alert to the possibility of a recession.
The Taoiseach said that globally recession is a risk but “not a given”.
He was joined in Brussels by Minister Delegate for European Affairs Thomas Byrne and Finance Minister Paschal Donohoe, who currently holds the presidency of the Eurogroup.
Donohoe made a presentation to leaders across the EU on developments in the European economy.
At the meeting, members discussed how Russia’s war on Ukraine is driving up food and energy prices, while creating economic uncertainty.
They said these factors are holding back growth and exacerbating inflationary pressures globally.
Speaking to reporters after the meeting, the Taoiseach said: ‘As far as I’m concerned – and it’s not just me, we’ve had discussions in relation to the three party leaders and the finance minister and the Minister of Public Expenditure – there is no doubt that a budget is the optimal way to deal with this crisis.
People are under a lot of pressure now. We have already taken action, but it now seems clear to me, following the consultations I have had throughout Europe, that there will again be a lot of pressure on us during the autumn and winter period. and that we have to prepare a complete package to do with that.
“We will use the budget in terms of additional measures to ease the pressures on people, but also to position the economy for the next 12 months to focus on areas of spending that will deal with the pressures on people. people, but which also gives us a sustainable path forward on issues such as childcare, climate, etc.
He said the cost of energy in particular will be “very problematic going into the fall.”
Ahead of the meeting, Minister Donohoe said eurozone countries must prevent the massive inflation seen in recent months from becoming a normalized feature of their economies.
He said he would tell EU Council members that while there are “new and growing” risks to economic performance, the economy is still expected to grow.
However, Donohoe stressed that “we need to recognize the risk we could face if inflation becomes entrenched in our economies.”
“It is in all of our interests that [with] inflationary pressures that we are currently facing, measures are being put in place to do two things.
“Firstly, to avoid the risk that these pressures become part of our medium-term outlook and take root in our economies, but secondly, as measures are taken to prevent this development, that governments also put in place appropriate measures to support those who have been most affected by the rising cost of living.
He said that “for many at the moment, the cost of living and its rapid increase are now leading to a very rapid fall in living standards” and that the euro zone must avoid fiscal measures which put additional pressure on the costs.
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According to Eurostat, consumer prices in Ireland were 8.2% higher last month than at the same time last year, slightly above the EU average of 8.1%.
A new report from the Institute for Economic and Social Research forecasts that the Irish economy is set to grow significantly despite external pressures, with average inflation of 7.1% expected for 2022.
Earlier today, the Taoiseach said Ireland’s domestic and foreign direct investment was significant, but any weakening in global markets could affect our exports in 2023, although there is “no immediate sign of it”.
“If you look at the last few weeks, businesses are continuing to invest in Ireland. Census figures reveal that people are coming to work in ever greater numbers over the years, even during the pandemic, reflecting a growing economy,” the Taoiseach said.
“But we have to try to find the right balance. We do not want to find ourselves in a situation of stagflation. This is something we want to try to avoid.