Former finance minister Ray MacSharry has warned Brian Lenihan that he should prepare to be the "most hated man in Ireland" after the Budget next month -- a description which was applied to Mr MacSharry for years: "But I survived".

At a private function in Dublin last week, Mr MacSharry also set out what was, effectively, his own Budget, a prescription which he said would return the country to economic growth by 2011 and to "full health" by 2016.

In relation to the most contentious decisions facing Mr Lenihan, the current Minister for Finance, Mr MacSharry said public sector pay and employment numbers had to be cut -- but, he said, he would leave the "dole" and old age pension untouched.

Mr MacSharry, who was twice minister for finance, in 1982 and 1987, also said that he would introduce what would effectively be a third rate of income tax on people earning over €150,000 a year.

And he said that local authorities around the country should buy up 50,000 unsold properties to rent or sell to those on the housing waiting list.

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Since his retirement from active politics, after a term as Ireland's EU Commissioner, Mr MacSharry has maintained a low profile in domestic politics. He is currently a director on the boards of several companies, including Bank of Ireland and Ryanair Holdings.

Despite repeated requests from the media, he has, until now, refused to give his views on and solutions to the current economic crisis or on Government policy.

However, speaking at the launch of a new book by Sunday Independent columnist Marc Coleman at the St Stephen's Green Hibernian Club in Dublin on Thursday night, Mr MacSharry seemed anxious to set out in some detail his opinion on what the Government should do in the Budget in December 9.

He treated his audience, which included former Fine Gael leader, Alan Dukes, and former President of the European Parliament, Pat Cox, to a lengthy economic analysis.

Mr MacSharry described himself as "positive" about the country's future, if the correct decisions were now taken. He said: "We cannot be content to announce our intention to curtail spending while at the same time deferring action."

While the Government has "done much", he warned: "A lot more needed to be done." He said: "We are facing very challenging and difficult times ahead."

He said Mr Dukes showed "great leadership" as Fine Gael leader when he adopted the so-called Tallaght Strategy, which allowed a minority Fianna Fail Government to set about bringing order to the public finances in 1987.

He said Mr Lenihan was now in a similar position, without the benefit of having a supportive Opposition. "Brian Lenihan should prepare to be the most hated politician in Ireland, as I once was. But I survived," said the man who was referred to as "Mac the Knife" at the time.

Mr MacSharry described himself as "positive" and "optimistic" about the state of the national finances. He said: "Borrowing is in place for next year. We are not bankrupt -- provided we do the right things now. If we don't, people will come knocking on the door and say 'if you don't do it, we will'."

He also said: "The Celtic Tiger was not in vain. The glass is three-quarters full. Most of the gains from 1987 to 2007 are secure. Right now we are back to 2004/2005 levels. Exports are doing well. It is up to ourselves. It is in our own hands. We can get back to growth by 2011 and to full health by 2016."

However, he said this would only happen if critical decisions were taken now. Referring to the McCarthy report, he said the Government needed to "implement everywhere savings which realistically can be made over a two year period".

He said: "Public service pay and numbers must be addressed. The recruitment embargo is not enough."

He added: "Pay cuts must lead to price cuts . . ."

In relation to social welfare, he said he would "not cut the dole or old age pension", but he said "waste and abuse" needed to be eliminated. He said he would take the children's allowance "off of those who do not need it".

The Government has declared itself against further increasing income tax, although the tax base is likely to be widened in the Budget. The Department of Finance has warned that high earners might emigrate should taxes be further increased.

However, Mr MacSharry believes the income of those earning over €150,000 a year should be further taxed. "We must act now," he said. He said such a move would help convince those paid below that amount that the "pain is being shared".

More generally, Mr MacSharry said the world banks must "create an environment for realistic average interest rates so no major bubbles will arise again". In Ireland, he said, there must be a "strong, stable third banking force".

He also spoke favourably of the Government's 'smart economy' policy, but he said that the Government "must encourage greater inward investment"; "must make sure SMEs have sufficient finance"; and must "capitalise more on our indigenous assets".

He identified the indigenous assets as agriculture, calling for "fairer prices for farmers"; tourism, calling for the scrapping of "access costs" to the country; fisheries, forestry, and also construction.

Mr MacSharry said 50,000 properties overhanging the market should be bought by local authorities to be rented or sold to those on the housing waiting list.

This, he said, could be done "off the books" at never to be repeated bargain prices. It would, he suggested, help the property sector properly function again.

- JODY CORCORAN EXCLUSIVE

Sunday Independent