'Brian Cowen's Government has the right approach'
The Taoiseach is putting us in a position to reap the benefits when the economy recovers, says Bertie Ahern
THERE has been much comment on the present economic situation. This comment has varied between sensible commentary proposing rational solutions and panicked assertions, sometimes from ill-informed and unqualified sources screaming for knee-jerk reactions.
The most important issues for Government facing an economic downturn is to ensure that the overall gains our economy has made over the past two decades are safeguarded; that our economy is placed in a position to continue growing into the next decade; and that the pain felt by a person losing a job is minimised as far as possible.
In order to accomplish these objectives, a sensible analysis of our economic situation is required. Such an analysis will reflect that many of the forces weighing on the performance of our economy are also weighing on many other economies to varying degrees:
• The higher cost of, and reduced access to, credit.
• Higher oil and food prices, which are eroding purchasing power.
• Fluctuating exchange rates.
• The adjustment of house-building sectors to more sustainable levels of activity.
The effect of these forces can be seen throughout the world economy. For instance, in the euro area, GDP actually contracted in the second quarter of this year.
In almost all countries, the real effect of these economic difficulties has been increased unemployment. Ireland's unemployment rate has increased to just over five per cent of the labour force. I know for a fact that Taoiseach Brian Cowen and his Government are committed to minimising the negative effects of unemployment on individuals and society through the investment of taxpayers' money in retraining programmes under FAS, education programmes in the VECs, and committing substantial levels of social-welfare support to those who find themselves in difficult circumstances.
I know that it is of little comfort to those who are unemployed but it is important to state that our national unemployment rate is less than the EU average of seven per cent, and the Government is actively working to safeguard our economy and its jobs.
At present, economic growth for this year is projected to be 0.5 per cent. Many of the forces restraining growth are likely to persist next year, so we do not expect a significant improvement in economic growth in the short term. The consensus among most economic commentators is that the global economy and our economy will recover in 2010.
The projected recovery of our economic growth to around 3.75 to four per cent per annum over the medium term is contingent upon doing the right things now so as to benefit from the global economic recovery when this emerges. In other words, we must maintain and indeed improve our competitiveness.
I am confident that Brian Cowen's Government is on track to achieve this and has already implemented a number of measures in this regard.
For instance, it is implementing prudent fiscal policies, including the recently announced savings and efficiencies.
These will allow us to maintain a relatively low tax burden and help to restore confidence in our economy.
This increased prudence in administrative expenditure is being counterbalanced by the need for Government to support economic demand when private-sector demand is falling. The Government is correct to prioritise exchequer investment in the National Development Plan, which will improve our productive capacity.
A good example of this is the national road network, which will make road transport more efficient through time savings in personal commuting and the transport of goods.
The road network is only one area of significant capital investment. In addition there is currently record investment in public transport, housing, electricity infrastructure, research and development, among other areas.
This capital investment is being complemented by the Government's current expenditure on social services.
We now have a record level of gardai, lower pupil-teacher ratios, and real increases across all social-welfare rates. Our society as a whole has worked hard to achieve these significant improvements.
It would be very irresponsible of any Government to put them at risk through ill-thought-out and panicked responses.
Taoiseach Cowen will not fall into this trap. His Government has adopted a measured, proportionate and sensible response to what is an international downturn. He is balancing fiscal restraint to ensure domestic recovery with the need to protect the vulnerable.
I believe this is the right thing to do as it will place us in a stronger position to maximise the benefits to Ireland of the global economic recovery.
- Bertie Ahern
