IMF praises Cowen rescue but says Celtic Tiger won't return
Economic growth will never return to Celtic Tiger levels, the world's economic watchdog says in a long-awaited report on Ireland's economy.
However, the International Monetary Fund (IMF) gives a ringing endorsement to the Government's attempts to save the public finances.
Ahead of the publication of the report this afternoon, Taoiseach Brian Cowen warned last night that the planned €4bn of spending cuts would have to be delivered in the December Budget.
At the Fianna Fail parliamentary party meeting, he pointed out that social welfare spending and public sector pay accounted for two-thirds of Government spending.
According to an IMF report, to be published this afternoon, the strain on the economy is the most severe economic distress since World War II.
But the IMF says the Government is right in the action it has taken on the two key areas of banking and the public finances. The report also says the Government has moved with resolve to counter the severe economic and financial shocks.
The IMF also commends the scale and speed of the Government's response to the economic crisis so far. The IMF backs the setting up of the National Asset Management Agency.
It says NAMA offers the chance of taking bad assets from the banks, which is a precondition for their return to health. And the IMF agrees NAMA can be self-financing.
The organisation also welcomes the important steps to stabilise the financial system taken by the Government, mentioning the bank guarantee scheme, which it says was vital to maintaining stability.
On the public finances, the IMF says the Government is making the right choices. But it says more will have to be done to control public spending -- a clear reference to the social welfare budget.
The IMF predicts the economic growth rates after the recovery won't be anywhere near the double digit figures of the Celtic Tiger era. The economic growth rates will be far lower. Mr Cowen told his FF TDs and senators to hold firm against lobbying from pharmacists, who are currently contacting Oireachtas members to protest at the decision to cut €113m from their State payments.
He said it would be pharmacists today, farmers tomorrow and then another lobby group after that.
The Government will say the crucial point from the report is the endorsement of the measures it has taken.
But last night, it was accused of forcing through crucial legislation to provide an "undated blank cheque" to the Irish banking sector.
The attack came over a decision to push through a Bill providing new powers to Finance Minister Brian Lenihan to extend the bank guarantee.
Labour Party leader Eamon Gilmore insisted the controversial measures had been slipped into the Financial Measures (Miscellaneous Provisions) Bill in an underhand manner.
But Mr Cowen insisted the Government had signalled such a move as far back as February 2008 when it announced details of the bank recapitalisation programme.