Details of the credit guarantee scheme for businesses will be closely watched when the Government unveils its economic stimulus plan later this month.
That's according to Davy chief economist Conall Mac Coille who said the legislation would be monitored for changes to ensure banks would lend to small business that are facing severe liquidity constraints at present.
"The Minister for Finance has said Irish banks will have to have some skin in the game. It's not going to a 100% guarantee. If it's not, a commercial decision has to be made about whether businesses can be profitable and we may well see some companies not supported."
Tánaiste and Minister for Enterprise Leo Varadkar has indicated that the July stimulus will be unveiled the week after next.
Yesterday, the British Chancellor Rishi Sunak unveiled the UK government's economic stimulus plan which will cost around £30 billion.
That amounts to just under 1.5% of UK GDP, Mr Mac Coille said, and comes on top of the £113bn of measures already unveiled by the government there.
It has already signalled that the furlough wage schemes will be ending in October.
"Rishi Sunak is in a race against time. He's hoping that the economy recovers and jobs growth comes back," he said.
Emeritus Associate Professor of Economics at DCU Tony Foley said the government would have to decide whether the range of supports in the July stimulus should be universal or targetted.
One scenario he outlined would see the small and medium enterprise sector (SMEs) getting supports, but businesses that don't fall into that category would have to apply on the basis of hardship.
Speaking on RTÉ's Today with Sarah McInerney, he dismissed suggestions that the economy was in a better position going into this downturn than the previous recession.
"In 2008, debt to GDP was less than 30%. Now it's at 60%. We're in a better position now than we would have been 5 years ago, but we're certainly not better than we were in 2008."
Mr Foley said the downturn on this occasion was unlikely to be as severe as the last one as we're not in a position where we will need to bail the banks out.
"Hopefully, this (pandemic) will be a short term phenomenon that won't go on for years to come. If it is, we're into a completely different ball game."
He also said tax increases were likely in the years ahead as a result of the upsurge in borrowing and public spending brought about as a result of the pandemic.
"They (the government) said they wouldn't increase income tax. They could increase a battery of other taxes," he concluded.
Source: https://www.rte.ie/news/business/2020/0709/1152261-sme-scheme-in-july-stimulus-will-be-closely-watched/