Brexit panic: No deal could force Ireland into budget deficit with 50,000 jobs at risk

Leo Varadkar’s government aims to spend around £626million on new measures but only if Britain’s next prime minister manages to win support for Theresa May’s hated Brexit deal. Ireland has set aside hundreds of millions in order to “support the sectors most affected by Brexit”. While Dublin wants its October budget to run at a surplus, finance minister Paschal Donohue has conceded that a no deal Brexit would force him to turn it into a deficit “in the region of -0.5 to -1.5 percent” of GDP next year.

Announcing his summer economic statement, Mr Donohue outlined two scenarios – deal or no deal – that would impact Dublin’s finances.

He declared that Ireland would have to scrap planned tax cuts if there is a no deal Brexit, which would also cost the country’s economy 50,000 jobs.

Mr Donohue said: “If the country finds itself dealing with a disorderly Brexit, our first priority of the government will be to protect the country.”

He added that “all resources” will be used to “support the economy”.

If Britain leaves the EU with a deal, Ireland will have a £2.5 billion budget package in 2020, according to finance minister’s summit statement.

While £1.7 billion of the funds has already been allocated for projects in the future, Dublin has resisted spending the extra cash as the threat of no-deal Brexit looms.

The department of finance said: “This leaves €0.7 billion to be specifically allocated as part of the budget.

“Under the disorderly Brexit scenario, this could involve a headline deficit in the region of 0.5 percent to -1.5 percent of GDP for the next year, depending on the magnitude of the economic shock.

“This would allow for the automatic stabilisers to provide cyclical support allowing for a small surplus and temporary targeted support for the sectors most affected by Brexit.

“A decision will be taken in September, when additional information is available as to which is to become the central scenario underpinning the economic and fiscal forecasts for the 2020 budget. This is the sensible budgetary strategy and one that the Government intends to follow.”

Today EU diplomats and officials have been busy rubbishing Tory leadership frontrunner Boris Johnson’s Brexit plans.

The Tory MP’s strategy to take Britain out of the EU – with or without a deal – on October 31 were branded: “b*******”, “nonsense” and “utter rubbish”.

One EU diplomat revealed that no-deal Brexit is the most likely outcome unless Mr Johnson decides to strike a deal with Brussels based on Mrs May’s current agreement with the bloc.

The source said Brussels would only seek a compromise if Britain’s next prime minister can show they can “command a Commons majority for their plan”.

They added: “Without that what can we do? Emmanuel Macron will not allow any further Article 50 extensions without commitments to a general election or a second referendum.”

In an interview with the BBC last night, Mr Johnson said: “I would make sure that we have a plan that will convince our European friends and partners that we are absolutely serious about coming out and the key things that you got to do are to take the bits of the current withdrawal agreement, which is dead, take the bits that are serviceable and get them done. And that is number one.

“The stuff about European Union citizens, the 3.2 million, they need to be properly protected. I wanted that done the day after the referendum, you may remember. Their rights should be enshrined in an unconditional way in UK law, number one.

“Number two, you should look at the various other things that you could do to make progress with the bits of the withdrawal agreement that we have. I think the money is more difficult. I think the £39 billion is at the upper end of the EU’s expectations, but there is it, it’s a considerable sum. I think there should be creative ambiguity about when and how that gets paid over.”