Thursday 22 March 2018

Maeve Dineen: What the IMF should tell us to do

Maeve Dineen

THE IMF will publish its latest review of the Irish economy some time next week. It will doubtless be couched in the usual diplomatic terms that will allow the Government to announce joyfully that we have hit all our targets. Again.

But what does the IMF really think? Here is what I think the IMF would recommend if the gloves were off:

1) Croke Park is dead. With the public sector pay and pensions bill set to top €18bn in 2013 – almost a third of all public spending – the Croke Park deal, which guarantees no public sector pay cuts or compulsory redundancies, must be scrapped immediately.

Average public sector earnings of €925 per week are running almost 50pc higher than those in the private sector.

With no shortage of applicants for new, lower-paying entry-level positions in the public sector, it is clear that Croke Park is a luxury Ireland can no longer afford.

The IMF has regularly highlighted the fact that the pay and pensions bill is static, but the IMF should say that the time for hints is over.

2) Social welfare payments must be reduced. Even after the fraught cuts in child benefit and carers' grants, the Government still proposes to spend €20.2bn on social welfare in 2013. This makes it by far the largest category of public spending.

However, far from being concerned at the huge amounts being spent on social welfare, politicians of all parties compete with one another to express their "social concern".

With the basic Irish weekly social welfare payment of €188 being more than twice the amount paid in the UK and Germany, such concern is misplaced. It's time for some tough love on social welfare. Benefits have to be cut and fraud eradicated.

3) Order must be restored to the health service. With the 2012 overspend topping at least €400m, it is clear that Health Minister James Reilly has completely lost control of the Health Service Executive.

Neither of the cost-containment measures contained in the December 2011 Budget – a price-cutting deal with the pharmaceutical companies and making private patients pay for public beds in public hospitals – have come even close to generating the hoped-for savings.

So why should we have any faith that the €781m of savings targeted for 2013 will be achieved?

While I'm reluctant to personalise this issue, it is clear that Dr Reilly has now become part of the problem and that the chances of a solution to this mess would be greatly increased if he were replaced.

4) The banks must be made to lend again. Ireland's fatal mistake was that, unlike Iceland, it provided an effective sovereign guarantee for its bust banks.

As a result, the banks' liabilities became our liabilities. It was this guarantee that effectively bankrupted the State, leading directly to the November 2010 bailout.

The State has now pumped €64bn into the banks. As a result, we now have some of the best-capitalised banks in the world.

Unfortunately, the banks refuse to use this money to start lending again. This reluctance to lend is making the economic downturn even worse than it needs to be.

If the banks continue to refuse to lend, the Government must take whatever steps are necessary to compel them to do so. Give them proper targets. Sack bankers if they fail.

5) The Government must get a grip. Although it eventually passed, the hand-wringing by many TDs that accompanied last week's Budget does not augur well for the future.

With more tough decisions necessary in next year's Budget, the Government urgently needs to get back in the driving seat and focus on what needs to be done.

Inelegantly wrestling with its conscience is not the way to do this.

Irish Independent

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