Taoiseach Leo Varadkar expects the UK to leave the European Union at the end of March with a withdrawal deal, although his Government continues to prepare for "for all outcomes", including a no-deal Brexit.
Addressing more then 300 international bankers and finance executives at a conference in Dublin, Mr Varadkar said it was necessary to ensure that there would be no return to a hard border in Ireland and that the peace process be protected.
“We very much value the backing we have received from political and business leaders all over Europe, who recognise the importance of protecting the Irish peace process and the need to avoid the hard border on the island of Ireland, something much more important than money and jobs,” he said.
Mr Varadkar said that while the political response from many countries to an increasingly complicated world is often to seek “to retreat, to take back control, to take your country back” to a world that never existed, this is not the approach of the Government nor the wish of the Irish people.
“At a time when attitudes to global free trade and multinationalism are hardening in many parts of the world, Ireland is holding firm to our values,” Mr Varadkar said, reaffirming Ireland’s commitment to the EU and maintaining an open economy.
Budget flexibility
Although the Government is on course to run a budget surplus this year "provided Brexit does not blow us off course", it does have the capacity to run a deficit if necessary to deal with the potential fallout, he told the event, hosted by IDA Ireland and the Financial Times.
Speaking at the same event, Central Bank governor Philip Lane said the Republic’s ability to deal with the “immediate cliff-edge risks of a hard Brexit” have been largely addressed.
Prof Lane said the country’s ability to deal with sudden financial shocks has improved over the past decade.
Nevertheless, he said a disorderly Brexit would have “immediate disruptive effects that would permeate almost all areas of economic activity”. The agri-food sector, in particular, would be badly affected with rural and Border regions suffering more than others.
The Central Bank previously said a disorderly Brexit could reduce the growth rate of the Irish economy by up to four percentage points.
“In addition to the direct disruption to international trading arrangements, adverse developments in the UK economy have a general spillover impact in Ireland,” Prof Lane said.
“Given the current favourable forecasts for the economy as a result of domestic demand and the strong non-UK multinational sector, our assessment is that there would still be some positive growth in output this year and next, even under a no-deal scenario, but materially lower than in the central forecast,” he said.
