PEOPLE WILL have to become accustomed to the reality that it will take five years for Ireland to sort out its finances, Taoiseach Brian Cowen has made clear.
“Sometimes I think there is a view: let’s get this all over with on the 7th of April and get back to normal. This is a process of adjustment that must go on now for a period of years,” he told political correspondents in Government Buildings.
The decision to sit down with political correspondents was in itself unusual, and nothing similar has happened since he took over the reins of power from Bertie Ahern last year. It was a response to Mr Cowen’s private concern that people have yet to understand the degree of trouble facing the country, and the sacrifices that will be necessary.
Ireland is battling to “survive a very painful recession”, and has to deal with structural flaws in the tax system – now that property taxes have disappeared – in a way that does not damage the economy.
However, the country enjoys a 2009 standard-of-living, but funded by 2002/2003 incomes: which means that Brian Lenihan may not even be able to count on the €34 billion in tax revenues that he spoke about last week.
“That will give people a good indication of the gap that has emerged,” said Mr Cowen.
But the public must understand that the crisis is global, not just domestic – even if it was fuelled by local self-inflicted injuries. Small open economies like Ireland – such as Taiwan, South Korea and Singapore – “are the ones that are taking the biggest clobbering”.
A five-year plan, agreed with the European Commission, will offer time to deal with the €16 billion-a-year taxation gap now built into the exchequer’s finances, regardless of whether the international economy was doing well, or not, while an improvement in global fortunes would “pick up” the remainder of the deficit by growth.
“That is the thinking behind this and people need to understand and know how we are approaching this,” he said.
Not everything can, or will be done on April 7th: “This isn’t the only budget in which changes have to be made. There’ll have to be a lot more in ones to come.
“The challenge is huge, it is urgent and it is not going to go away. It will be difficult. We have to take these decisions now,” he said, adding that the Government must get the balance right between spending cuts, taxation increases and borrowings to protect “a fragile economy”.
But the public will not face a succession of mini-budgets this year: “We have to monitor the situation on an ongoing basis; but it isn’t our intention to return to this on a bi-monthly basis. That is not the intention.”
Though the social partners are back inside Government Buildings, it is clear that the unions can expect few concessions on the pension levy. Workers and managements in private firms are coping with four-day weeks and pay cuts to stave off redundancies: “That is what happens in the real economy,” he said.
“The pension levy was a very important indication of our determination to deal with this problem on the basis that the status quo wasn’t an option,” he said.
And he offered a qualified apology for the mistakes of the past: “Do I take responsibility for some of the decisions that I have taken? I take all the responsibility for all of the decisions that I have taken in my public life. And they were taken by me on the basis of the best possible advice available to me at the time.
“Are there changes that I would contemplate were I to know now that we would be in this position? Of course, there’d be different decisions that you would take. But we don’t all have crystal balls.”
