Economy has 'turned corner' says top rating agency boss
Published 13/10/2010 | 05:08
THE economy will recover more quickly than several other European countries and has 'turned a corner', world financial experts claimed last night.
A key global credit rating agency offered one of the most optimistic assessments to date of our prospects.
But the chances of consensus emerging among political parties on Budget measures needed over the next four years remained slim after an unenthusiastic intervention by Taoiseach Brian Cowen.
Other foreign economists also agreed with the agency's assessment, saying the Irish economy had "turned a corner".
At the same time, Finance Minister Brian Lenihan is grappling with the prospect of generating up to €4.5bn in tax increases and spending cuts in the forthcoming Budget.
The Standard & Poor's credit rating agency, which has consistently given Ireland negative economic outlooks, provided a distinctly upbeat assessment of our prospects yesterday.
Its chief economist, David Beers, made the comments in Washington. He said concerns about fiscal and political risks to the country were exaggerated. And he forecast that the economy would recover faster than other peripheral European countries.
Mr Beers said: "Ireland's competitiveness is improving because the labour market is flexible; they're cutting wages and salaries. So we think that among the peripheral countries it would be the first to begin to recover.
"People think that the Irish political establishment may be suffering from exhaustion, reform fatigue. We actually do not detect that," he added.
He was speaking in Washington in the course of meetings of the International Monetary Fund and the World Bank attended by many of the world's financial leaders.
He said there could be more bad news in the banking sector, but downplayed market fears that the Government could be losing the willingness to proceed with economic reforms or to keep fiscal discipline.
Mr Beers said the Irish economy was likely to recover faster than other weak eurozone countries such as Portugal, Spain and Greece because it had a more flexible private sector, and foreign direct investment kept flowing into the country.
After his comments, Gillian Edgeworth, an economist at Italian bank UniCredit, which often comments on the Irish economy, said she believed the Irish economy had "turned a corner" although it remained "fragile" as the Government struggled to push down the country's budget deficit.
Meanwhile, the prospects of cross-party Budget talks, as proposed by Green Party leader John Gormley, are still remote.
Giving his second cool reaction to his junior coalition partner's idea, Mr Cowen ruled out "tying himself" into the process.
His comments had been awaited by the opposition parties, who wanted to find out whether he was serious about giving them a real role in drawing up plans to rescue the public finances over the next four years.
Although Mr Cowen expressed a willingness to meet the opposition party leaders, he warned that the Government had a responsibility to produce its own four-year budgetary plan.
"I'm not tying you into a process that you may have reservations about, or I’m not tying myself into a process that suggests that we all end up with some arrangement where bits of everyone’s proposals can be considered.
That wouldn’t meet the requirements of the situation," he said.