Ireland is arming itself against a Brexit 'rainy day'

Dublin (AFP) - irelIreland’s finance minister presented a “Brexit-proof” budget on Tuesday, including a 1.5 billion euro ($1.7 billion) “rainy day fund” in case Britain’s divorce from the EU sends economic shockwaves through the country.

The fund would be supplemented by 500 million euros annually, starting in 2019, under the budget proposed by minister Paschal Donohoe – the last before the scheduled Brexit date of March 29, 2019.

“Our ability to withstand economic shocks needs to be stronger,” he said.

“This is why I am establishing the rainy day fund to increase the state’s resilience to larger economic shocks.”

Donohoe also admitted that the prospect of a no-deal Brexit had been factored into the budget outlined to parliament.

Both sides are hoping to reach a deal over trade ties and the Irish border – where disruptive controls will be instated unless compromise is reached.

Other measures to address Brexit outlined in the budget include a 110-million euro fund for steps such as “essential customs requirements” which will need to be introduced once the UK leaves the EU.

A loan scheme to provide up to 300 million euros for small and medium sized enterprises and the agriculture and food sector was also announced.

“This budget is very much Brexit-proof,” said Prime Minister Leo Varadkar in a video aired on the eve of the budget.

“First of all it’s balanced, which means that if we do have to borrow as a result of a difficult Brexit, we’ll have the capacity to do so.”

“We’ll also establish a rainy day fund which we’ll be able to dip into if we’ve a difficult Brexit and we need to do things to help out business and farmers for example.”

The budget is likely to pass, as Varadkar’s minority Fine Gael government has a working majority through a coalition with independent lawmakers in tandem with a confidence and supply agreement with the country’s second largest party Fianna Fail.

The agreement commits Fianna Fail to backing three government budgets – of which this will be the last – but will expire at the end of 2018.

Varadkar is keen to extend the deal and avoid an election until 2020, to steady the helm as Brexit unfolds.

But Fianna Fail leader Micheál Martin has indicated talks to renegotiate the accord will begin only once the budget has been announced, meaning Tuesday’s announcement could mark the beginning of a power shift in the country.