Taoiseach Brian Cowen has warned the Irish public that five years of hard decisions lie ahead to bring the country’s finances back to health.
“Sometimes I think there is a view: let’s get this all over with on the 7th of April and get back to normal,” he said, following the latest Cabinet meeting on the April 7th emergency budget.
"But quick remedies are not possible. This is a process of adjustment that must go on now for a period of years,” he told political correspondents in Government Buildings.
The decision to sit down with political correspondents was in itself unusual, and nothing similar has happened since he took over the reins of power from Bertie Ahern last year.
Because of the collapse of property taxes and falls in income taxes over the last decade, the Exchequer has a €16 billion hole in its finances, regardless of global economic fortunes.
The Government, said Mr Cowen, intends to fix this crisis by 2013, while a global upswing would deal with the rest of the problem.
But he repeatedly stressed the scale of the difficulties ahead, warning that Ireland is trying “to survive a very painful recession.”
Public services will have to be cut, because Ireland is enjoying a 2009 standard of living, but now has 2002/2003 incomes. This is some €2 billion lower than even Brian Lenihan predicted just last week.
“That will give people a good indication of the gap that has emerged of how you balance. It shows how steep and severe the downturn has been,” said Mr Cowen.
Public sector workers angered by the pension levy cannot expect concessions from Mr Cowen, who pointed out that private sector workers are enduring four-day weeks, and pay cuts.
“People are having to do it. That is what happens in the real economy,” he said pointedly. “We had to make some decisions that weren’t popular either but they had to be made. The 7.5 per cent pension levy on average was a very important indication of our determination to deal with this problem on the basis that the status quo wasn’t an option,” he said.
But the public must understand that the crisis is global, not just domestic – even if it was fuelled by local self-inflicted injuries.
Small open economies around the world like Ireland – such as Taiwan, South Korea and Singapore – “are the ones that are taking the biggest clobbering”.
A five-year plan, agreed with the European Commission, will offer time to deal with the €16 billion-a-year taxation gap now built into the Exchequer’s finances, regardless of whether the international economy was doing well, or not.
An improvement in global fortunes would “pick up” the remainder of the deficit by growth, Mr Cowen said. “That is the thinking behind this and people need to understand and know how we are approaching this.”
"Not everything can, or will be done on April 7th. This isn’t the only budget in which changes have to be made. There’ll have to be a lot more in ones to come."
“The challenge is huge, it is urgent and it is not going to go away. It will be difficult. We have to take these decisions now.”
The Government must get the balance right between spending cuts, taxation increases and borrowings to protect “a fragile economy” he added.
But the public will not face a succession of mini-budgets during the year. “We have to monitor the situation on an ongoing basis; but it isn’t our intention to return to this on a bi-monthly basis. That is not the intention.”
Though the social partners are back inside Government Buildings, it is clear that the unions can expect few concessions on the public service pension levy.
Mr Cowen offered a qualified apology for the mistakes of the past.
"Do take responsibility for some of the decisions that I have taken? I take all the responsibility for all of the decisions that I have taken in my public life. And they were taken by me on the basis of the best possible advice available to me at the time. Are there changes that I would contemplate were I to know now that we would be in this position? Of course, there’d be different decisions that you would take. But we don’t all have crystal balls. We can’t all see into the future with great accuracy,” he said
“ But all of the decisions that we took were taken on the basis of the best advice at the time. Do I regret? I regret anyone that is unemployed in this country; I regret the fact that anyone is facing anxiety and concerns. Of course I do. Am I fully responsible for that? No. But do I take my share of responsibility in respect of it. Of course I do. I have never suggested otherwise."
“If I was the sole contributor to this, I would have the solution today to get out of it. There is a global, wider context to this."
“We did create more employment than anybody else. We did have these improvements. We did halve our debt. We did increase our social welfare payments well beyond the cost of living. We did a lot of good things,” he said.
