The 19 countries which use the Euro single currency – including Ireland – are at risk of economic recession, Finance Minister Paschal Donohoe has warned.
r Donohoe was speaking as president of the Eurozone countries meeting in Brussels to review the interlinked energy price crisis and the more general spiral in inflation rates.
This meeting is taking place in tandem with an EU leaders’ summit which today will have a difficult discussion on how to tackle growing economic difficulties. On his way into this leaders’ summit, the Taoiseach struck an optimistic note stressing the continued growth in Irish job creation – but he also conceded the risk of Irish recession in the future.
“No, I’m not acknowledging that – yet. But there’s a risk of recession globally and across Europe, “Mr Martin told reporters at the EU summit center.
The Irish Finance Minister stressed that the EU and Eurozone are better placed than many other parts of the world to face the upcoming difficulties.
But he said all EU countries now had to strike a balance on the urgent need to “tame inflation,” while protecting the most vulnerable people unable to pay for basics, and also safeguarding jobs.
Asked about a growing view in the USA, that recession is now needed before rising inflation can be controlled, Mr Donohoe said the current problem for the Eurozone was that inflation was now outstripping economic growth. He warned that if inflation “becomes embedded” in economies in the longer term all difficulties will be intensified.
“We have acknowledged that recession is a risk in all of the economic forecasts that have been brought forward over the last number of months. But what we are seeing happening at the moment is lower growth rather than a recession materializing, ”Mr Donohoe said.
The Eurozone finance ministers are also being addressed by European Central Bank governor, Christine Lagarde, whose organization has already signaled the inevitability of serious interest rate rises in line with the USA, UK and elsewhere.
Mr Donohoe said the Eurozone was currently working on budget framing guidelines for all countries to help them prepare next year’s tax and spending plans. He said these guidelines would be complete in the coming weeks and signaled these would feed into Ireland’s next Budget due to be unveiled in October.