We had a fairly lengthy period of denial. Now we are at the anger stage.

Public servants against private sector workers, everyone against bankers and speculators and regulators and politicians. But this stormy meeting of the stakeholders in Ireland Inc needs to come to order. If necessary, we could set up a special subcommittee -- a quango called the Office of Retribution -- where we could hive off this necessary cathartic anger, much in the way of a toxic debt.

Then the chairman and the board could get on to the next phase -- acceptance -- and start doing something positive to get us out of this mess, before there is nothing left to fight over.

Of course, we all want to know exactly who did what in the inner workings of Anglo Irish Bank or any other errant financial institution over the last few years. We want names to be named and heads to roll. But right now we need to concentrate on what matters -- getting people back to work.

To do that, we have to sort out some real problems. And if we don't sort them out now, then there is no reason to believe that we will ever get back to any sort of normal prosperity, let alone the prosperity of the property boom or even the dot com bubble.

Businesses large and small are retrenching or closing down and, as a result, people are losing their jobs on a daily basis. This is primarily because the banks are not functioning as commercial banks; the State is technically broke; and we are not competitive.

The reason the banks are not functioning properly is that those institutions abroad which would usually lend them money will not do so, in any normal commercial way. Punitive interest rates are being charged. International financial agencies clearly do not believe Irish banks are a good risk. The value of a bank is calculated from its share price. But it is clear that those who matter do not accept that even the very low current share prices can be trusted.

That is because the main financial institutions have consistently refused to make public the full extent of the bad loans they hold and the full extent of their liabilities to those international lending agencies they have borrowed from in the past. This latter worry applies particularly to Anglo Irish. And the recent news about the unorthodox manner in which some of these financial institutions seemed to help each other conceal the truth has made the situation worse.

It may be that the outstanding bad loan book and debt exposure isn't that bad and the bankers are keeping them under wraps because they believe they have a handle on it and can trade out of their difficulties eventually with some help from private investors and an input from the Government, but in the meantime, the credit squeeze must continue.

It's a kind of bluffing game and essentially involves keeping our heads down until the storm has passed and it is safe to come out again. But it ignores the fact that banks exist for a reason -- to lend money -- and if they are not doing that, then they cease to have a good reason to exist. Certainly, in these circumstances, they would not merit the support of the public purse.

With full transparent disclosure, tougher regulation and enforcement and restricted remuneration, the share price of a bank would begin to truly reflect its real value. Then foreign investors and lenders would know exactly what their risk was in lending to Irish bankers, and perhaps normal trading could resume. That seems straightforward, so why hasn't it happened?

The lack of transparency has led to a very real and depressing fear -- perhaps an unjustified fear -- that our financial system is, in fact, a basket case, especially as our financial system includes that monstrosity known as Anglo Irish Bank.

What if the combined liability of all the institutions is astronomically frightening? Then not only would there be no foreign borrowing, but the Government would have to step in. Which, in turn, creates its own problems. This scenario assumes that the State has virtually limitless resources. Which it doesn't.

In fact, the State's income vis-a-vis its outgoings is currently so out of whack that it is not out of the question that it could be the State itself that might yet need a bail-out. As Martin Cullen said on Questions and Answers on Monday night, "The pay and pensions and social welfare bill in this country today is €43bn, and that is before we spend a penny on anything else. Our income this year will be €37bn. In this year we will have to borrow €4,500 for every man, woman and child in the State. Over one-quarter of all our current bills will be paid with borrowed money."

This sad condition of the national figures is a perennial problem which we were able to ignore in the good times, but even in the good times it was something that needed to be addressed. Now we do not have a choice.

So it is right that the Government seeks to tackle the level of remuneration in the public service. But the first step -- cutting €2bn from the public spend this year -- was so drawn out and ultimately unsuccessful (the real figure will be nothing near €2bn) that it is hard to be confident that the even bigger cuts mapped out for subsequent years have much chance of being achieved.

And cutting cash costs is only the start of what needs to be done. Efficiency has to be introduced, getting rid of the dead wood, stripping the level of service down so that it satisfies only two criteria -- what we really need and what we can really afford. There must be a concentration on the essentials -- finance, health, education, social welfare and security. Everything else we can look at again when the good times return. Tough times need tough measures.

In the private sector wages have already begun to fall. That trend will have to spread throughout the economy to help us regain the level of competitiveness we once had that helped make us so attractive for foreign investment. We will also need new incentives for employers -- national and international -- to take on staff; and disincentives for letting them go.

Innovative tax breaks worked well for us in the past. Taxes that are yielding diminishing returns cannot be relied on. A deft and delicate redrawing of the tax code is necessary -- and not one that will discourage commerce.

Changes to the tax code can be made on a temporary basis until we regain a measure of control over our affairs. Tax reform is vital, so it is disappointing that the Commission on Taxation has decided now not to issue an interim report, but to wait several months more to issue a final report, in the absence of which the Government seems unlikely to act.

Most of all, a serious cash injection is needed. In this regard we should be neither afraid nor ashamed to explore the possibilities of outside help. It may well be that the time has come to find out the real value of EU and euro membership in a time of crisis. Credit has to be restored to business and to the individuals who are the customers of business. Credit does not mean lending money to businesses that are going to go under anyway, just to keep them afloat for a few more weeks or months. It means normal lending facilities for those businesses -- large as well as small -- that are viable and keeping people in employment.

But if the black hole of banking is as bad as some people fear, it may be that the State's €7bn recapitalisation will be the only liquidity that is going to be available to the main banks in the foreseeable future.

In that situation, it may be necessary for the Government to allow the existing functioning banks to start off with a clean sheet by transferring any toxic debt they may have to Anglo Irish. Foreign loans would have to continue to be paid back -- reneging on them would be a disaster. There is the possibility too of an immediate negative impact on the international rating, not just of our banks, but of the State -- a rating that is pretty shaky right now anyway.

It may be this fear that has made the Taoiseach and the Minister for Finance appear so nervous and tentative over the past few months.

But however bad the problem is, it will not go away by being ignored.

So far, the Government has been cautious. On cutting public spending, it has been slow and indecisive. On the banks it has constantly kicked to touch, acting only when forced to but with the imperative of not actually handing over (but certainly risking) a single cent of taxpayers' money. On tax reform it has not acted at all.

It is now beyond argument that the immediate recapitalisation of the banks must be accompanied by the twin initiatives of reforming the public sector and stimulating the private sector. It really is all or nothing now.

Unless there is a comprehensive approach, a massive cash injection to the banks, on its own, could prove to be money down the drain. And if that money went down the drain, where would we be? Back here again, only in much worse shape than we are in now. Then we would not just be looking at broken banks, but we would have a very real prospect of a broken State.

Bold moves are essential, and equally essential is the painting of a clear picture of where we can hope to get to by taking decisive action. The carrot is as important as the stick, and the people must be shown some distant light if they are to follow down the dark tunnel. We may be in a recession, but we won't help ourselves by being depressed or hiding our money under the mattress. If everyone did that, our money could end up being worthless!

The real political problem is that what needs to be done will be unpopular. Nevertheless, it needs to be done. Charismatic leaders may be in short supply, but let us hope we have leaders of mettle to grind us through to better times. The zeitgeist will catch up, and, whatever the government, they can take further comfort from the knowledge that, while doing the right thing will not win any popularity contests, there is a certainty that those who oppose them will be condemned by history.

If we dither and complain for much longer, we will eventually find ourselves with plenty of time on our hands and little much else to do but erect the scaffolds, and line up the bankers the builders, the land speculators, the regulators and politicians. It will be the only feel-good factor left.

- Willie Kealy