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Austerity alone will not resolve crisis in economy, admits Minister Howlin

"Austerity alone will not resolve Ireland's economic crisis,'' the Minister for Public Expenditure has told the Sunday Independent.

Brendan Howlin, who is on the Cabinet's economic subcommittee of four, said: "If we simply cut expenditure and raise taxes we will go into a downwards spiral.''

He was anxious to note that "we cannot borrow money unsustainably either'' but added that "job creation and growth is critical. To be a revival, you can't suck all the money out of the economy."

Speaking to the Sunday Independent, the Minister, who is a key negotiator with the IMF, said: "There is an attitudinal change." He noted that "we have complied with all the disciplines so we are now being cut a bit of slack because of the recognition we could be the first country out of a programme''.

Howlin added that "previous administrations over- promised and under-delivered'' when it comes to reform and "our commitment is to do the opposite''.

The Minister also confirmed it was unlikely the privatisation process would stop with the ESB. He instead noted: "We have asked the NTMA and the Departments to engage in an evaluation of the potential value of other assets."

This exercise was conducted by Colm McCarthy in 2008 but the Minister noted the "values of semi-states have changed since then".

Senior government figures are increasingly confident the proceeds of Ireland's privatisation process will not be used to pay down debt and will "to some degree at least'' be used to fund a economic stimulus package. Such a development would be seen by some as representing a major U-turn by the economic Troika.

Government ministers were reluctant to comment on the development. However one senior figure close to the Cabinet told the Sunday Independent that while under the initial deal it was understood "any State assets would be used to retire our debts, there are positive signals flexibilities are available".

The minister added that while the text of the agreement hasn't changed; they [the Troika] have "moderated their views'' on the use of funds secured from privatisation for a stimulus.

Sunday Independent