Ireland has no choice but to assume Brexit trade talks will fail, says minister

Ireland now has no choice but to assume the UK and the EU won't sign a trade deal, an Irish minister said.

The UK government's attempt to override elements of the take-back agreement through domestic law has increased the likelihood of a no-deal, public spending minister Michael McGrath admitted.

Finance Minister Paschal Donohoe shared this view when the couple set out their government's strategy for next year's budget.

The economic impact of the UK's exit on World Trade Organization trading conditions and the ongoing costs of the Covid-19 pandemic feed into a budget outlook that projects a deficit of up to 19 billion euros (£ 17 billion), or 5.5% of GDP – in 2021.

Mr McGrath said the 2021 budget, which will be released next month, would allocate significant resources to the sectors that will be hardest hit by a no-deal.

But he added: "There is nothing the Irish government can do to match the disruptive effects of a no-trade-deal Brexit on our economy."

“We therefore sincerely hope that the sense will prevail and that an agreement will be reached. However, from a budgeting point of view, the only reasonable assumption to be made at this point is that no agreement will be reached in the next few weeks.

“It is in everyone's interest that this scenario be avoided, but it is not directly within our control. Given what has happened over the past week or two, I think we have no choice but to assume there won't be a deal. "

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<figcaption>Michael McGrath said it was wise to assume there would be no trade deal (Niall Carson / PA)</figcaption></figure>
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<p>Mr Donohoe said the chances of a no-deal had increased as a result of the move in Westminster.</p>
<p>"My view of the likelihood that this will happen has changed over the past few weeks and even days," he said.</p>
<p>“Particularly given and since the internal market legislation was published in the House of Commons. That was of course a very important event.</p>
<p>“And we believe that from an Irish perspective it is appropriate and safe to be ready now to deal with the consequences of a no-trade Brexit.</p>
<p>"As great as these consequences may be, I am absolutely certain that our economy will be able to deal with these consequences and rebuild itself over time."</p>
<p>Ministers said Ireland's good reputation in international markets would allow the government to borrow billions of euros to make up next year's deficit.</p>
<p>The effects of the pandemic have already confronted the country with a deficit of up to 30 billion euros this year.</p>
<p>The state has so far spent around € 24.5 billion on Covid-19 support measures, including a wage subsidy system and improved unemployment benefits.</p>
<div class=
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<figcaption>Paschal Donohoe said the UK government's Single Market Act had a significant impact on the chances of a deal (Leon Farrell / PA).</figcaption></figure>
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<p>In the spring the ministers will publish a medium-term plan to reduce the deficit.</p>
<p>The government is not planning any large-scale income tax hikes to stimulate public coffers for the next year and insists that such a policy would be "counterproductive".</p>
<p>The budget will include details of a large recovery fund to deal with the ongoing effects of Covid-19.</p>
<p>In line with the government program agreed by the coalition administration of Fianna Fail, Fine Gael and the Greens, the sectoral priorities in the 2021 budget will be health, housing and climate change.</p>
<p>As last year, the carbon tax will be increased by six euros per ton, with some of the money generated going back to communities affected by the fossil fuel transition.</p>
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