Jobless may pass 15.5% - Cowen

Taoiseach Brian Cowen told the Dáil this morning that unemployment is likely to reach 15.5 per cent before the end of the year and could "rise somewhat again” next year.

The Taoiseach made his comments as data from the Central Statistics Office (CSO) showed the number of people claiming unemployment benefit had risen to 413,500 in June, an increase of 11,400 on the month of May.

“It is the slowest rate of increase since January," Mr Cowen said.

"Obviously it is very clear that the unemployment situation continues to be affected as we implement the three necessary aspects of recovery which are: bringing order to our public finances, improving the competitiveness of the economy and bringing forward the reforms of our banking system,” Mr Cowen said.

Responding to a question from Labour Party leader Eamon Gilmore, Mr Cowen said that since Sept 08 “we have seen an increase of 197,000 on the Live Register. But the fact of the matter is that by the end of this year, unemployment is expected to be 15-15.5 per cent it could in fact going into next year rise somewhat again.”

Fine Gael leader Enda Kenny said the economy was “in crisis”. Mr Kenny challenged the Taoiseach to confirm that the Government would deliver on its plan to spend €7.3 billion in 2009 and €6.6 billion in 2010 on capital expenditure.

The Taoiseach said he could confirm that it was the Government’s “intention” to spend about 5 per cent of GNP which he said was one of the highest ratios in the world for capital spending. He said it was “important to point out” that the prices of tenders have decreased by 10 to 15 per cent and that the volume of output is greater as a result.

Commenting on the Taoiseach’s assertion that the latest CSO figures indicated the slowest increase in unemployment since January, Labour's Eamon Gilmore said “we’re sinking more slowly – but we’re sinking nevertheless.”

Responding to Mr Gilmore, Mr Cowen said it was clear that “unemployment will continue to rise unfortunately before it gets better.”

“We will continue to take whatever structural measures are necessary to alleviate that situation in the meantime.”

Mr Gilmore claimed that the cost to the economy of increased unemployment will cost the State as much as €4 billion in lost tax revenue and increased social welfare payments.

This, he said, would “wipe out” savings of €1.5 million expected to be cut by the Expenditure Review Committee, known as “An Bord Snip Nua”, from the Department of Social and Family Affairs’ budget over the coming 12 months.

Exchanges in the Dáil became heated and at one stage it had to be adjourned because of the outbursts.

Rounding on the opposition, Mr Cowen said Fine Gael’s proposal on the banking crisis “relates to reneging on senior bondholders – that’s the Lehman brothers solution and we see where that got us.”

“The proposal from the Labour Party in respect of the banking situation is a pre-emptive nationalisation of all the banks – that’s the Icelandic model - we know where that got us.”