Minister for Finance Brian Lenihan tonight admitted the €15 billion four-year adjustment to the Irish economy will be difficult for everyone but he believed the country can “tackle” the problem.
Mr Lenihan was speaking after his department published a 10-page document setting out its ambitious plan to reduce the country’s deficit to 3 per cent of GDP by 2014.
According to the plan the Government aims to frontload €6 billion of the €15 billion correction into next month’s budget.
In an interview on Today FM's The Last Word this evening Mr Lenihan said: "We can opt to do this adjustment or we can keep expressing ourselves through anger and the denial of the problem.
“We have already done half of the adjustment that’s required by the end of this budget we will have two-thirds of the adjustment completed - €20 billion of the €30 billion - so we are in fact proceeding very well and doing very well as a country.”
The Minister admitted the country would be in a better positioned to handle the situation if it didn’t have to deal with the bailout of the banks but said the cost of that has been averaged out over a long period of time.
“In cash terms, it’s €1.5 billion a year. Even in terms in the interest bill increase for us it’s a third of that - two-thirds of it stems from the borrowing we have to do to keep this state going on a day-to-day basis. “
“We are borrowing all the time on a day-to-day basis to furnish our day-to-day expenditures. No household borrows on a day-to-day basis to buy groceries, the Irish state has been doing that since 2008 hoping something will turn up - nothing has turned up so we have a deeper correction to start bridging that gap.”
“We have huge problems in our public finances, because we are all living beyond our means in terms of the Irish state, and yes we have huge problems in our banking sector, we’ve plans to address those sectors and they are being implemented.”
“No other party and no other government would do otherwise,” he added.
Mr Lenihan also said the State is being faced with higher bond yields because of comments by the German Government concerning sovereign debt and not anything he did.
“The German Government has stated that it is intended to default on sovereign debt in the European Union as part of the bailout plan from 2014 onwards, that has spooked the market.
“That is not anything I said…I have been very consistent throughout this crisis that Ireland must honour her obligations and we cannot have a bank collapse or it will do untold damage to the economy,” he added.
Speaking later on RTÉ, Taoiseach Brian Cowen said the country had to face up to gap in public finances.
“It’s a question of closing the gap between what you are spending and what you are earning as a country.”
He said the “frightening scenario” for the country would be to allow a situation where the funding of the State would be put at risk.
“I’m saying the €6 billion extra correction next year is front-loaded - why are we doing that? “Because we want to convince people on whom we depend to fund our deficits to continue to provide finances for the State so that we are in a position to deal with our problems responsibly.”
“If others want to be irresponsible and suggest an easy soft option I’m afraid I’m not prepared to conduct that sort of politics, things are too serious for people and I want to be as straight and honest and frank with them as I can,” he added.