SOCIAL PARTNERSHIP was facing its biggest challenge for the last quarter-century as a result of the international financial crisis and the slowdown in the construction sector, Taoiseach Brian Cowen said at the weekend.
However, he expressed confidence that the partnership process could rise to the challenge and successfully tackle the problems the economy was currently facing.
Talking to Irish journalists prior to his departure from Beijing after leading an Irish trade mission to China and addressing the Asia-Europe (ASEM) summit meeting, Mr Cowen outlined his thinking on economic matters in some detail.
Asked how long he believed it would take for his message to get through that it was necessary to undergo pain in the short-to-medium term to ensure long-term economic stability and prosperity, the Taoiseach said people should be aware the current problem had arisen in a very short period of time.
"It's important that people recognise that the problem we have in Ireland, the budgetary problem that has arisen, has come very quick, a very sharp slowdown in economic activity during the course of this year arising out of both the domestic problem in terms of domestic residential construction output slowing very considerably, and also the international situation."
The openness of Ireland's economy meant that "we have to roll up our sleeves and go out and fight very hard in international markets to maintain the living standards that the Irish people have worked hard to achieve".
He continued: "The overall external economic environment is going to be far tougher next year, and the year after, than has been the case in recent times."
Outlining the Government's role he said: "Our job on behalf of the Irish taxpayer is to seek to get the greatest possible value for money for the less money that is now coming into the exchequer.
"There's depleting resources and therefore there have to be impacts on the service provision side, as there are impacts on the taxation side, as there are impacts on the borrowing side," said Mr Cowen.
"And we still have a deal to go, a journey to make, to bring our own current expenditure in line with current income on the day-to-day side of the equation."
Co-operation would be essential to this, he said: "I believe social partnership has this challenge, that we simply have to work together to take whatever adjustments are necessary now, to protect to the greatest extent possible the very significant achievements and improvements in public services we have seen during good times. We know from our recent economic history over the last 25 years that if we don't make those decisions, if we defer those decisions, then we put all of that social provision under greater threat because you don't have the sustainable base of exchequer monies coming in to fund such services. That's a basic equation that everyone understands."
In terms of public expenditure, the Taoiseach said that, much as he would like health, education and social welfare to remain immune from reductions in spending, the scale of the problems meant this was not possible because three-quarters of day-to-day spending was in these three areas.
"There have to be impacts in those areas as there are very significant impacts on other areas and I think social partnership can rise to this challenge.
"It's the real test of social partnership now to see can we muster the collective will to face into these issues and deal with them on behalf of those who are coming after us, to make sure that we don't go down a borrowing spiral that puts us right back in the position we have got ourselves out of and extricated ourselves from over 15 or 20 years."
The Irish economy had acquired some strengths in recent years, he said. "It's a more diversified economy, it's a more resilient one and it's an economy that I believe can recover in due course.
"We [the Government] will continue to play our role in that respect on behalf of the taxpayers by having a very considerable public capital spending programme."
He pointed out that "there's a very significant spend by Government next year on the capital side of over €8,000 million that will generate a lot of activity offset some of the decreased activity you are going to find on the private sector side".