NESC calls for strategic investment bank to be established
THE Government must set up an investment bank to help businesses to borrow, the National Economic and Social Council said in a report yesterday.
The NESC backed the promise of a strategic investment bank contained in the Programme for Government, which was agreed between Fine Gael and Labour earlier this year.
While many economies return to growth without credit, recoveries where there is credit tend to be quicker and deeper, the agency claimed, citing IMF research.
"Creditless recoveries represent around one in five of all economic recoveries. They are more common in low-income and emerging economies but represent an estimated 10pc of recoveries in advanced economies. Creditless recoveries are substantially weaker than normal economic recoveries," the agency added.
The report's four authors also called on the Government to "work" the IMF and EU bailout deal.
"Working the deal rather than debating whether the deal can work allows us to concentrate on plans and actions that might, in spite of confined space for immediate action, unify Irish actors around projects of economic and social development," said the organisation, which advises the Government and the social partners.
"The Irish Government and the policy community need to be active contributors to the ongoing analysis of policy developments in the European Union and euro area. This is increasingly recognised as necessary to stabilise the euro and provide a context for Irish recovery."
The report also called for a sharper focus on exports to help the economy. Despite the country's 8pc rise in exports last year "it is possible to achieve higher growth rates; for example, the value of German exports of goods increased by almost 16pc in 2010".
There was further broad support for the Government yesterday from Goodbody Stockbrokers economist Dermot O'Leary, who welcomed recent changes in the bailout deal but noted that tough political choices still needed to be made.
"The Irish Government should use their current popularity to inform the public what exactly is in store over the next few years by way of spending cuts and tax increases," Mr O'Leary said.
"Although fiscal consolidation over the coming years will continue to depress domestic demand, this is the price that has to be paid for returning the public finances to order.
"No government will be rewarded politically for taking these decisions, but giving clarity to the public on impending changes to their disposable incomes is the best approach from an economic point of view," Mr O'Leary added.