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A wake-up call for politicians

THE Central Bank carefully avoids getting into politics but, with the economic crisis the one and only issue in the election campaign, its latest analysis is bound to have a political context.

The two dominant issues in the early days of the campaign have been the terms of the rescue bailout and the jobs crisis. The Central Bank quarterly has something to say about both; although not all of it will help the political parties as they line up their promises.

Each must inevitably maintain that life would be better if they were in government. The Bank's economists point out how very difficult that will be to achieve over the next few years.

Its forecast that national income (GNP) will contract again this year, for the fourth consecutive year, is considerably more gloomy than its forecasts last autumn, but the Bank is clear as to the reasons. Instead of the Budget correction of €3bn planned back then, the actual adjustment in tax and spending was doubled to €6bn.

The autumn forecast was also based on the ability of government to borrow on reasonable terms. Although the report does not say so, the 5.8pc being charged for bailout funds is more than many people regard as "reasonable."

The Labour Party may look to such comments to support its idea of extending the correction process by a further year, to 2015. Fine Gael has already made sure it was seen attempting to reduce the interest rate on bailout loans.

As to the first, if these gloomy forecasts turn out correct, the public finances will not stabilise by 2014 anyway. The real choice will be whether to take further action as that becomes clear, or let the deadline drift. Part of that choice -- perhaps the bigger part -- will be made by the IMF/EU, not the new government.

It also looks probable the bailout interest rates will be reduced some time during the life of the next Dail. Again, it will be an EU decision, based on the wider imperative of saving the euro, rather than an Irish one.

If the decisions are favourable, the Government will no doubt claim the credit. It will have more of a struggle making good on promises to make a significant dent in unemployment. The Bank calculates that the next two years will see falls of 2pc in personal spending, 8pc in government consumption, and 14pc in investment.

It is impossible for employment to grow in such circumstances, whatever politicians say. They would do better concentrating on the Bank's strong warnings about the inefficiencies and high costs that have "long characterised" the sheltered sectors of both the public and private sectors.

Irish Independent