Monday 22 January 2018

Now it's time to focus on the real economy, stupid

The phrase comes from 1992 and was first used in the United States, but it is far more relevant to recession-bound Ireland in 2010.

Bill Clinton's reminder to George Bush Sr that "it's the economy, stupid'' resonates with every taxpayer (or bank debt payer) in the country. As the Government tries to finally put a line underneath the Anglo problem, it is time to move on and deal with the issues stretching far beyond the narrow confines of the balance sheet of Anglo Irish Bank.

Brian Lenihan and Brian Cowen, for a myriad of reasons, have failed to neutralise the Anglo issue and prevent it spilling over on to the national economy.

The failure to come up with creative solutions to the Anglo problem has arguably cost the country hundreds of millions, if not billions, in additional debt interest.

While the decision to intervene is welcome, it has taken far too long to arrive at this point.

Nevertheless, it is time for the political establishment to devote energy, willpower and some modicum of imagination to the wider economic malaise that has left us with unemployment at 13.8pc and an economy that will contract another 0.5pc this year, when measured in GNP terms.

Clearly, there is a need for another austere budget in December, but it is also time to concentrate on at least making use of the pot of money that has been set aside for capital spending.

Capital budget

To date, the Government's capital budget spend is 24pc behind where it should be. The capital budget, while never big enough in a recession, is Ireland's version of a stimulus and action is needed to get the funds circulating into the economy far quicker.

There is also the need to deal with the unemployment problem. More than 25pc of those on the live register last worked in the construction industry -- there is a need to rapidly re-skill these people before the unemployment problem becomes structural.

The other problem impacting upon the real economy is the issue of personal debt and mortgage arrears.

So far, the reaction to this challenge has been one of complacency -- unemployment will peak and the problem will level off or property prices will recover and wipe out the negative equity built up in people's homes. Wishful thinking.

Again, real political leadership is needed on all these issues.

Banking crisis management must halt and energy must be spent on fixing the wider economy.

Irish Independent

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