MR COWEN is back at his desk in the Taoiseach's office and, most importantly, signalling that he is in control. The announcement that the Government, at its first Cabinet meeting since the summer recess, is to bring forward the timing of the 2009 Budget to October is welcome news.
It has been clear for some time that the fiscal measures announced last July to deal with the economic downturn were both inadequate and excessively crude. Now, in the face of rapidly rising unemployment, a further deterioration in tax revenues and a worsening economic outlook, the decision to produce an emergency budget will see off those critics who claim that he is paralysed by indecision. Whether he will be imaginative enough to advance proposals to stimulate the economy, increase consumer spending and, thereby, generate confidence in his leadership will determine his authority to govern in the rocky couple of years ahead. He would be in touch with the political climate, however, if he were to advance brave, possibly harsh, decisions now.
Within days of the Government announcing that spending cuts of €440 million would be made this year, Central Bank Governor John Hurley went on record to say it wasn't an adequate response to the situation. How right he was. Yesterday, we learned of the biggest rise in unemployment numbers for 10 years. The services sector has gone into reverse. And tax revenues for the year could be more than €5 billion less than forecast. This is far worse than was expected as recently as two months ago.
What is required at this time is political courage and cool fiscal calculation. Mr Cowen, no less than his predecessor, has been untested by harsh economic circumstances. The same holds true for Brian Lenihan, his Minister for Finance. The decisions that will be taken in Cabinet over the next number of weeks will deeply influence the length and the depth of this downturn, along with the quality of life that people will enjoy when it ends. In retrospect, few will thank Ministers for taking soft options. Having decided against the introduction of a mini-budget in the summer, in case they might be accused of worsening the housing slump or of "talking down the economy", they are now racing to catch up. Major trends are almost uniformly negative. The only positive development has been a fall in oil prices.
By announcing that the date of the budget will be brought forward, the Government has signalled deep disquiet over the economic situation and hinted at tax changes. But that isn't enough. The gravity of the situation has yet to impact on the general public. While that remains the case, it will be impossible to promote the need for voluntary wage and income restraint within the public and private sectors. Mr Cowen will have an opportunity to address these issues when he meets with the social partners tomorrow. He should also reconsider making a "state of the nation" address.
There is a serious need for political leadership and a real public appetite for it. But there is an acceptance that social pain should be shared.