06 July 2008

Tight Rope Walks for the Economy

The Irish Congress of Trade Unions (ICTU) has predicted that inflation in Ireland could rise to 6.5% by January 2009, because of interest rate increases by the European Central Bank (ECB).

Speaking as the Social Partners resumed their talks on a new National Wage Agreement, ICTU General Secretary David Begg (left) said that the government should have a word with the President of the ECB, Jean Claude Trichet.
He declared that the ECB's increase of interest rates - recently to 4.25% - would "damage the Irish economy, hinder investment and make life impossible for people trying to pay mortgages".

Mr. Begg had already called earlier for a review of Ireland's tax system, including the taxation of capital gains as income.

The employers' group IBEC described his proposals as "unhelpful, unrealistic and a throwback to the dark ages".
Its Director General Turlough O'Sullivan said that enterprise was the only way forward for the economy, and that "Ireland must be an attractive place for industry to come".
He described ICTU's proposals as "counterproductive", adding that they "would neither attract nor retain investors in Ireland".

Former PD junior minister Tom Parlon, now head of the Construction Industry Federation, warned that the sector was "under severe pressure to keep businesses going", with some even facing liquidation.
He called for pay restraint and incentives to encourage the sale of houses and to get confidence back into the market.

It is expected that employer and union representatives will respond to the deteriorating financial position presented to them by the Taoiseach, the Tánaiste, and the Minister for Finance.

The half-year Exchequer returns predict a € 3 billion tax shortfall for this year, and the Irish government is expected to disclose its plans for addressing that deficit next week.

Tánaiste and Minister for Enterprise, Trade & Employment Mary Coughlan (right) stated that "the economy is not in meltdown", nor was Ireland returning to the financial difficulties of the 1980s. She said the Cabinet would address all the issues about public finances at its meeting next week.

Last Wednesday government figures were published, showing that there is a shortfall of almost € 1.5 billion, or 7%, in tax receipts in the first six months of this year.

Ms. Coughlan explained that one of the main priorities for the government was "capital investment", allowing the maintenance of the well-being of the economy.

She said the public finances would be discussed in the Cabinet on Tuesday and that Minister for Finance Brian Lenihan (left) would then outline the issues to the Dáil on Wednesday during a debate on the economy and on Europe that is planned to last nine-and-a-half-hours.

Listening to commentators -
Ms. Coughlan remarked - "one would think that the country just closed down last week". It was important to remember that the government would be spending € 8.5 billion this year.

The Tánaiste said that her message to investors was that Ireland was a good economy, the fundamentals were right, "we are open for business, we are flexible and we have the management capacity to engender confidence in the economy". Nothing was being ruled in or out, but decisions would be based on "the government's priority on a background of competitiveness, sustainability and caring for the vulnerable".

As so often in Irish politics, the points of view depend entirely on the positions various people hold. The government, dominated by Fianna Fail now for more than eleven years, has no time for gloom and doom. Obviously, as it could only blame itself. The only way for Brian Cowen, who as former Minister for Finance is indeed also personally responsible for the country's economy, is onwards and upwards. And to no-one's surprise the employers' organisations are of the same view, as only growth can bring the profits.

But is seems that they - once again - overlook the small people, who did not benefit from the windfall of the "Celtic Tiger". Before our sudden economic boom began, about 20% of the people in Dublin were regarded as "living in poverty". After a dozen years of unprecedented economic growth and boom the ratio is still the same. The situation around the country is similar to the capital.

If they like it or not, the members of our government have to accept the fact that they did not do a particular good job with the extra money Ireland made since the mid-1990s. Now that there is no more money left, Dublin and its surrounding area is still one large and unfinished building site, while infrastructure, transport systems and especially public transport remain at a low standard when compared with other developed countries.

It would indeed be foolish to think that "all is lost" and button down the hatches of the economy. But optimistic talk alone will not solve the real problems we have to face. The
Taoiseach, the Tánaiste and the Minister for Finance have a huge responsibility, and on their decisions depends the economic situation of Ireland in the coming years. In order to make tough - and perhaps unpopular - decisions, one has to see the whole picture, accept the facts, be realistic and have new and innovative ideas.
So far I have not seen much of that from the government.
All it has done is to send out again and again the same cheerful message: "Don't worry!"

That alone won't do, and one can only wait with interest and expectation for the new "action plan" the two Brians - Cowen and Lenihan - are preparing, probably as I am writing this. The country will listen carefully to their words, and watch with even more attention their deeds. But one thing is certain already: Should they hold on to their own fat perks, while trying to make the majority of small people tighten the belt, Ireland could very quickly and easily return to the bad old days of economic struggle, inefficiency, striking workers and instability.
On a tight rope one wrong step can mean a deep fall.

The Emerald Islander

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