We sail perilously close to disaster
The government dismissed last week's revision of Ireland's budget deficit as a "technicality" that made no difference to the true state of the economy, but it was a shocking reminder of how close we sail to disaster. In a week when the Greek government was forced to seek a bailout from the International Monetary Fund and the European Union, Ireland was revealed to be the country with the worst public finances in Europe.
The international markets were focused on Greece's difficulties, but their attention will soon switch to the other potential casualties within the eurozone. It may well have been a technical issue -- Europe has decided that money spent on Anglo Irish Bank cannot conceivably be classified as an investment -- but Ireland's true difficulties are masked by another technicality. In most countries there is only a minor distinction between Gross Domestic product and Gross National Product (GNP), but in Ireland the gap is as much as 25 per cent because of the strength of our multi-national sector.
The GNP figure is a much more realistic representation of the Irish economy and our deficit, expressed as a percentage of GNP, as it heads into truly terrifying territory. Despite three budgets in 14 months, wage cuts, spending cuts and tax increases, Ireland's position remains perilous. There will have to be further cuts in government spending in each of the next four years and there will be increasing pressure for tax increases and for new taxes.