There is a simple message in the Economic Review & Outlook published yesterday by the Department of Finance. Future economic growth will not be sufficient to to fulfil the public's expectations of both better services and an improved infrastructure.
The Department of Finance makes it clear that the outlook for the economy is relatively benign, but there are a number of potential threats. They range from the low level of competition in some sectors of the economy to wage inflation, the appreciating euro and the consequences of a second No in the Nice referendum. Over and above these, if the Irish economy is to recover, then it is essential that the international economic recovery picks up momentum. Given the openness of our economy, this is the main threat to growth in the second half of this year.
Assuming a benign international backdrop, then there is every expectation that the economy will grow comparatively strongly in the medium term. But the time has come to make a choice between more short-term Government spending and investment in the infrastructure that will deliver long term growth. The department does not directly answer the question it poses, but Merrion Street clearly prefers the second option. It is also clear that the Department's comments are directed as much at the Government as the public at large.
... ... * ... * ... * ... ...
The Department has effectively put it up to its political masters to confront this issue. To a certain extent the Government appears to already have given its answer. Investment in infrastructure - as exemplified by the National Roads Programme - is falling, while the administration is adamant that it is not contemplating widespread cutbacks in day-to-day spending ( although some evidence is suggesting that it is also seeking savings in current spending). The forthcoming Budget - to which yesterday's document forms the backdrop - will give a clearer indication where the Government stands.
It would have been preferable if such a far- reaching decision had been put to the people in the recent general election. Attempts to try and frame the economic debate in these terms became bogged down in a welter of financial projections that seemed to square the circle miraculously between diminished financial resources and public expectation.
It is no surprise then that the opposition have seized on the revised economic forecasts published yesterday to claim that the Minister for Finance deliberately deceived the electorate about the state of the economy during the election. They justify the claim by pointing out that all of the minister's main Budget day predictions have all had to be revised downwards.There is little to be gained from such political point scoring. A debate over the very stark choice proposed by the Department of Finance would be more productive.