Impact on the Government Deficit of a Reduction in the Public Sector Pay Bill

A further cut in the public sector paybill in addition to what was already planned and implemented under the Public Service Agreement 2010-2014 (‘Croke Park 1’) is likely to have a negative impact on domestic economic activity – other things constant.

While difficult to model all of the impacts of the proposed adjustment it is likely to reduce the General Government Balance in a full year in the long-run by no more than one quarter (or €250 million) of the total amount (€1 billion).

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