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Dan White: Five ways to put the X Factor back into our economic confidence

The IMF team pays its latest visit to Ireland just as the publication of the first quarter Exchequer returns shows just how weak the domestic economy has become.

The IMF team will quickly discover that until some of the debt burden is lifted from taxpayers' shoulders, there will be no recovery

Forget the spin. The first quarter Exchequer returns, which showed the gap between public spending and tax revenue for the first three months of the year, weren't bad. They were absolutely dreadful.

By far the most worrying aspect of the first quarter figures was the very poor performance from both income tax and VAT.

Income tax was 4.2pc behind target for the first three months while VAT was 5.4pc behind target.

What both of these figures indicate is that the EU-dictated budgetary strategy isn't working.

That's because it can't work. The notion that we can pour more than €70bn into zombie banks, with more almost certain to come, keep pushing up taxes, protect politically-sensitive public spending and still keep the economy growing is utterly absurd.

It's like some sort of mad Rubik's cube. No matter how hard we try to solve it we are doomed to fail.

So how do we get ourselves out of our current mess? The essential first step is that both our leaders in Ireland and our EU/IMF masters recognise the reality of the situation.

So what can and should be done?

1 Europe must shoulder some of the debt burden

Even if the banks require 'only' €24bn of extra capital, we are now looking at a gross national debt of close to €300bn once the banks' borrowings and NAMA are factored in.

That's way beyond the capacity of the Irish economy to bear. Having bailed out the senior bank bondholders to the tune of at least €70bn, the ECB must now share some of the pain and take some of this debt on to its own balance sheet. Otherwise an Irish sovereign debt default is inevitable.

2 We must get real on public spending

Even before the cost of the bank bailout this country will borrow €17.6bn this year. If we want to persuade Europe to share some of the pain then we are going to stop paying our bureaucrats some of the highest salaries in the EU.

This is going to involve some extremely unpalatable political decisions but, until we start to help ourselves, we can't expect others to help us.

3 No more money for the banks

Last week the Government agreed to pump a further €24bn into the banks. We must make it crystal clear to the ECB and the IMF that we are not going to give the banks another cent. If the ECB is so afraid of the contagion caused by an Irish bank failure then it should be prepared to foot the bill.

4 Cut the bailout interest rate

The Shylock 5.8pc interest rate that Ireland is paying the EU for its €45bn portion of last November's bailout -- money the EU is borrowing at less than 2.9pc -- has become the issue around which opposition to our existing economic and budgetary policy has crystallised.

While the interest rate is in many respects a symbolic issue, it does illustrate the one-sided nature of last November's bailout and must be significantly reduced in order to demonstrate Europe's willingness to make a contribution to solving the problem.

5 Give the Irish people hope

Confidence is the 'X factor' every economy needs to thrive. Right now there is no confidence. Instead even people who still have jobs and money are too terrified to spend.

The Government must convincingly demonstrate to the Irish people that there is a way forward that doesn't involve seemingly endless tax increases. Until it does things are going to get even worse than they already are.