Just seven short months ago, the question facing politicians, economists and to some extent the electorate, was what should the winners of the pending general election spend the €11bn in unallocated resources or "fiscal space" that they would likely have over the next five years on?

Fast forward from January to July, and today the Government pushed the button on a single package of additional measures for just the next year that will cost the State nearly half of that amount.

The massive change in attitude to fiscal prudence is a measure of how serious a situation we find ourselves in.

In the interim, an unforeseen pandemic has swept the globe, claiming more than 620,000 lives and wreaking havoc on the world economy.

Ireland's economy, like that of most countries, has not been immune and is experiencing a sharp and severe contraction.

Instead of an expected surplus of €2.5bn for 2020, the Exchequer now looks set to record a deficit of between €23bn and €30bn.

Against this backdrop, it is vitally important that the economy receives a sugar boost to get it going, after months of severe lockdown brought on by Covid-19.

Today’s "July Stimulus" contains a variety of measures that aim to do that, while at the same time preserving jobs in peril and finding new jobs for those who have already lost them.

The plan ticks many boxes from an extension of the Pandemic Unemployment Scheme and the introduction of a new wage subsidy scheme that will run to next spring, to additional grants, low-cost loans and capital investment.


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The blanket cut to the VAT rate came as a surprise and a cost of €440m, while the Stay and Spend initiative to boost tourism is an innovative way to encourage those who do have money to part with it.

The split between loans, grants and capital that business groups had called for seems in general terms to have been delivered.

The €7.4bn (including the previously announced Credit Guarantee Scheme) that is being committed is a massive amount of money.

And it comes on top of around €14.6bn that has already been shelled out by the Government on Covid-19 related enterprise and labour measures in recent months.

It shouldn’t be forgotten that this is mostly money that we have to borrow.

Will it be enough? Only time will tell on that and much will depend on whether we end up facing into a second wave of Covid-19.

The speed with which the package is implemented and the ease with which businesses and consumers can access the measures will be key.

But in general, while welcoming some of it, business groups have criticised the scale of the stimulus plan, saying it doesn’t go far enough.

A number, including the largest employers’ group Ibec, say that while it represents an important step in rebooting the economy, it is just one step and more will be needed.

Can we afford it? At the moment Ireland is fortunate has access to very low cost finance on the international markets, so for now the answer is yes.

That of course could change over time, if Ireland falls out of favour, if central banks reduce their supports or global market sentiment changes.

The capital will also have to be paid back at some point, either through tax increases or economic growth.

But really rather than ask can we afford to do it, with so many businesses teetering on the brink and employees without work, the pertinent question is can we afford not to do it?

The answer clearly, is no.