FINANCE DUBLIN CORPORATE BANKING & TREASURY

The plight of Castletownbere is a case study of how innovative and quick acting fiscal policy can protect the economy in the Covid Crisis
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21st March 2020: The Irish Examiner report that Castletownbere Fishermen's Co-op with 500 livelihoods is in threat of closure because fresh fish markets have collapsed is a case in point of how the Irish Government can use its top rank credit rating to implement "All that it takes" fiscal policy. At risk is not just this important part of the economy's infrastructure, with 400 self employed fishermen and 100 PAYE taxpayers in the processing plant. It is a case study in microcosm of enterprises and jobs that are in trouble the length and breadth of the Republic right now.
Key Points are:
1) The Castletownbere enterprise is an important part of the food infrastructure of the west coast, supplementing Killybegs in Co Donegal. It is important, not just because they support thousands of livelihoods, and the ecology and tourism of the West Coast, but are a guarantee of the future supply of fresh fish from Ireland's North Atlantic coastal waters long after the coronovirus threat passes.
2) If "All that it takes" fiscal policy is not taken immediately these enterprises will immediately begin to disintegrate, as their key resources - the people who work in them - have, by necessity, to disperse to other places, to get alternative livelihoods.
3) The immediate and most effective solution is an "All that it takes" Government guarantee that their wages will be supported during the crisis - which is only likely to last in its present intensity for another few months.
4) The key element here is the impact on economic confidence that such a guarantee would have, not just on the livelihoods of the people working in the West Coast fishing industry, but on all such enterprises the length and breadth of the Republic. Such an absolute guarantee is not available from any other source. Banks cannot do this, because they have to seek backing (security) for any money they advance. This is why monetary policy, while important, is in a secondary supportive place during an economic crisis like this.
5) This week, the European Commission announced that it would relax conditions under the EU State Aid Rules to allow individual member states to take the necessary action at Government level. The UK has used its Brexit freedom to make fiscal history be announcing a set of radical actions to provide companies with guarantees that wage packets of staff will be supported during the crisis.
6) The Republic of Ireland's credit rating is currently higher than the UK's. That essentially means that Ireland can take at least the risk that the UK Government is currently taking through its measures this week.
7) So far the fiscal measures announced by Ireland amount to about 1.5% of GDP. It is now clear that substantially more than this will be needed. Measures to match the moves emanating from the UK, and the US should be taken to assure the hundreds of thousands of people (self employed and salaried) who are currently facing the loss of their livelihoods.
This article was published on 21st March 2020.