April 24, 2024
Economy

Go now while economy is healthy or wait until more homes are built? – The Irish Times


According to insiders, the Government has three potential windows for a general election that must be held, at the latest, by March 2025.

The first, but perhaps the least likely, option would be to wrap it in to the upcoming European and local elections in June, creating a three-in-one “super-election” in the process – a headscratcher for voters but logistically efficient.

The motivation here is economic. Europe’s growth profile has flatlined, triggering a downturn in Irish exports and a recession in GDP (gross domestic product) terms. This could get worse before it gets better, particularly with Europe’s powerhouse economy Germany under a cloud.

The Irish labour market has also begun to soften and the Government’s extremely favourable budgetary position, fuelled by buoyant tax receipts, has probably peaked.

The logic of the early election option would be to strike now before the State’s strong macroeconomic co-ordinates shift. That said, the thinking inside Government is that a June date is too soon, particularly with the upcoming referendums.

There are also several pieces of legislation Ministers want to see across the line before their tenure in office ends, not least the Planning and Development Bill, which aims to overhaul Ireland’s sticky planning system.

This is seen as essential to unlocking further housing supply, which Coalition parties see as key to their election pitch. Taoiseach Leo Varadkar has also signalled he is not planning for an early election.

The second election window, and the one said to be favoured by many on Government benches, is to hold it directly after the budget in October or early November.

The advantage of the autumn strategy is that it gives the Coalition one more chance to woo the electorate with another generous budgetary package.

It would also allow the Government to shape the election around its economic policies, the ones it claims have safely steered the State through Brexit, the pandemic and the cost-of-living crisis.

This, according to one well-placed source, would give the electorate “a binary choice” between the current administration and one presumably led by Sinn Féin. “We haven’t had that in the last two elections,” the source said.

Every self-respecting government tries to cultivate an image of fiscal prudence – to signal otherwise would be politically ruinous – but the temptation to politick the budget on the eve of an election will be big.

Either way, the measures will be picked over by the Irish Fiscal Advisory Council (IFAC), which is already in the Government’s face over its decision to drop its 5 per cent spending rule.

The third window would be to serve the full term, potentially holding the election in late February or the first week in March. The advantage here is that the Coalition will benefit from a further uptick in housing supply, long seen as a key election determinant.

Housing completions rose to a post-crash record of almost 33,000 last year and recent commencement data suggest the momentum is continuing, giving the Government the chance to say, at very least, that it is making progress.

Minister for Finance Michael McGrath seemed to signal a preference for this option in a recent interview with The Irish Times.

“The world is very uncertain, there is an inherent instability in global politics, and if we can show the Irish public that we, as a government, have been able to work through our difficulties … and that at the end of our term if we can demonstrate progress in housing while having an economy in good health, more or less full employment, running budget surpluses … then I think we’ll have a good story to tell,” he said on the fringes of the World Economic Forum in Davos in Switzerland.

There are drawbacks to waiting this long, however.

Former US president Donald Trump could be back in the White House, threatening to pull support for Ukraine and potentially ramping up trade tensions with Europe and China, all of which would create a very uncertain global environment – particularly for a small, export-led economy reliant on global trade.

The Government may also have to hold a series of byelections in the wake of TDs transplanting themselves from the Dáil to Brussels via the European elections. Byelections tend to go against incumbent administrations and a sequence of losses would make for an uneasy trajectory into a general election.

An added complexity is the possibility of Fine Gael heavyweight and Minister for Public Expenditure and Reform Paschal Donohoe departing domestic politics to become the next head of the International Monetary Fund (IMF) in Washington, a position for which he is said to be in the running.

Equally, the public mood in a cash-strapped, post-Christmas period can be somewhat sour. Politicians won’t relish campaigning in the cold of an Irish February either. All of which points to an autumn election strategy for the Government.

Another weave in the tapestry that might have a bearing is the sudden and expected fall in support for Sinn Féin, a trend picked up in three recent polls. The Coalition won’t be in any rush to fast-track the vote if that continues.



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