Wake up: there is still time to stop the slump
Cowen is asleep at the wheel as the economy tanks. But there is a way to avoid carnage, says Daniel McConnell
It has been another torrid week for the Irish economy. Just two months in and Brian Cowen's Budget forecasts are in tatters.
The country is now in a recession and the time has come for the Tanaiste to stand up and be counted or let someone who is willing to save the economy have a go. His negligence and stubborn refusal to act is killing it.
Look at all the signs, every single one screaming that the economy is in big, big trouble. Housing market dead, new car sales dead, consumer confidence is dead, record job losses, exporters being killed off by a strong euro, fuel prices spike, housing repossessions increase and the list goes on and on.
But what exactly is going wrong with the economy? What we are seeing is the economy enter recession territory as a result of the stagnation and then the collapse of the housing sector.
Last Tuesday's release of the Exchequer forecasts show tax receipts so far in 2008 have come in way under expectations. Tax revenues collected during January and February were €684 million, or 8.3 per cent lower than in the first two months of 2007. So far this year, tax receipts amount to €516 million, 6.4 per cent less than anticipated.
The VAT revenues collected in the first two months of this year were 7.3 per cent below expectations in the department. Also, the yield from stamp duties was €297 million, or 44 per cent lower than in January and February 2007. Receipts from capital gains tax during January and February were €331 million or 39 per cent below the amounts collected in the first two months of 2007.
Then it was announced on Friday that there was a record rise in unemployment in February. The unemployment rate is now 5.2 per cent with 187,900 people now on the live register.
Despite the stark warning calls, IBEC has incredibly said the job losses are "necessary and welcome". Speaking on Friday, IBEC senior economist Fergal O'Brien said: "We knew 2008 was going to be a challenging year for the Irish labour market. We knew there was an adjustment coming in terms of the number of housing completions, it's down about 40 per cent in 2008. It is a necessary and, while somewhat painful, ultimately welcome adjustment for the Irish economy."
Welcome because it's not his job lost.
Labour's Joan Burton said any talk of a soft landing is nonsense, claiming we are being "thumped hard". She accused the Government of being asleep at the wheel and bereft of ideas to solve the problem.
There is now no doubt that the collapse of the housing sector is hurting the wider economy and we are now technically in the midst of a recession.
But the problems are even worse. Ireland is no longer internationally competitive.
Our wage and energy costs are way too high. Our physical infrastructure is 20 years behind and our broadband network is the joke of Europe. Every week, more and more firms are leaving Ireland and we are no longer attracting the likes of ebay, Google or Microsoft, because we are too fat and bloated.
Today, the Sunday Independent is putting forward a 10-point plan to save the economy. As Prof Morgan Kelly of UCD has put it, Ireland must "go back to basics". We must control spending, invest wisely and introduce stimuli in flagging sectors. A Keynesian styled stimulus package now would have long lasting benefits for the entire country.
Step one: Cowen must reform residential and commercial stamp duty, even if he doesn't abolish this penal tax. In its current form it is a clear barrier to activity. Ireland also has one of the highest commercial stamp rates in Europe.
Step two: Cowen must make small businesses with turnover of less than €750,000 a year VAT-free. Many of these firms are hit with VAT bills that place their existence at risk. Rather than just rewarding large businesses, breaks for smaller ones will have a solid impact across the country.
Step three: Cowen must reduce income tax as he promised and also reform corporation tax for small businesses. A reduction in income tax will help foster consumer confidence while a further reduction in corporation tax will give businesses a welcome boost in more challenging times.
Step four: Cowen needs to speedtrack the NDP and make broadband a top priority. Ireland is far behind many of our European counterparts in terms of our infrastructure. The Government has already said Transport 21 will fail to meet its targets, but every delay is killing our competitiveness.
In terms of broadband, we are a joke. We offer 1mb capacity only in some places when Japan is at 100mb. It's a disgrace.
Step five: Cowen must rein in the red tape. Ireland is being choked by national and local government red tape. It puts people out of business and must be reduced.
Step six: Cowen and Bertie Ahern must ensure that wages don't increase. They are already too high and we are losing out because of it.
Step seven: Cowen must tackle the monster that is the public sector. There are too many people on the state payroll with many not knowing what they do, particularly in the HSE. He must reduce the cost of the public sector.
Step eight: Cowen and the Government must make their voices heard in Europe and demand ECB chief Trichet drops interest rates. Ireland is not alone, and if joined with other small countries we could make our voice heard.
Step nine: Cowen must help Irish exporters being squeezed out by the strong euro and the weak dollar.
Step ten: Cowen and Eamon Ryan must reduce energy costs for businesses and consumers. It is the second biggest barrier to investment, after wage costs.
There you have it:10 simple steps to help reverse the trend of recession. It is time for Cowen to step up to the mark, and show that he is worthy of being leader of this country. His refusal to act so far has put Ireland at risk and it is you and I who will have to suffer the consequences.
- DANIEL McCONNELL
