There a couple of breaking stories concerning a report by the IMF about what needs to happen in Ireland (see Press Association here and Reuters here).  This is actually a report about structural reform and governance across the Euro area and includes recommendations for every country, principally about kick-starting growth through comprehensive labour and service market reforms.  The report then does not specifically focus on Ireland and actually only gives very broad brush policy suggestions.  These are:

Raise employment to avoid persistence of current high unemployment rate:

  • Introduce gradual decrease of benefits over time of unemployment spell and stricter job search requirements
  • Provide more resources to the unemployment agencies (FÁS) to provide efficient job search assistance to the growing number of unemployed
  • Review the level of minimum wage to make it consistent with the general fall in wages

Improve competitiveness to promote exports as a sustainable source of growth:

  • Reform planning and licensing systems in network industries, so as to increase competition in sheltered services sectors
  • Focus public resources on high-priority projects in the knowledge-based economy

The report does not deal with the specific parameters of these suggestions, which are not really a surprise.   The report does, however, give a general framing of the IMF view.  For example, the following statement re. taxation and benefits very much favours harmonization across the Euro area: “Improving access to the labor market should be high on the priority list everywhere—including through some harmonization of key features of the labor market, which will help deal with intra-euro area imbalances. Differences in labor taxation, unemployment benefit systems, and employment protection will need to be reduced. Improving regulation and reforming taxes and social benefits will be essential to make inroads.”  It does not mention corporation tax specifically, but one imagines it is not off the agenda.

As for the broader kinds of structural reforms needed in Ireland and elsewhere, the following heatmap from the report gives some indications of where the IMF see the gaps.

IMF structural reform gaps in European economies

The report then gives some indication of the broader IMF view re. the Euro area, but we’ll probably have to wait a little while before they flesh out their specific recommendations with respect to Ireland.

Rob Kitchin

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