Video-Stormy debate on Irish rejection of Lisbon Treaty at European Parliament

Ireland-Exchequer Deficit Blues

Ireland will have a deficit of €1.62 billion this year, compared with an Oct. 2 forecast of €1 billion, according to the Department of Finance. This contrasts with a budget surplus of €4 billion just a year ago.

The Government must bear much of the responsibility for the deterioration in the public finances. In 2007 there has been a 13% growth in the rate of public expenditure as FF and the PDs wooed the electorate. This paid political dividends as the FF/PD government duly returned to power with the support of the Greens and Independents. Already many of the FF election promises have been binned. Prior to the 2002 General Election the FF/PD government allowed public expenditure to escalate out of control. In the immediate aftermath of the 2002 General Election FF Finance Minister Charlie McCreevy set about reigning in public expenditure and introduced a raft of stealth taxes. He failed to index income tax allowances thereby pushing large numbers of PAYE tax payers onto the higher tax rate. Prior to the 2002 Election FF and PD Ministers denied that there would be public expenditure cuts.

A similar scenario to 2002 has now unfolded in 2007. The Government will once more cut public expenditure and introduce stealth taxes. Over the next 2/3 years it will build up a a financial war chest. As the anticipated 2012 General Election approaches public expenditure will once more mushroom. Brian Cowen and Dermot Ahern -during the 2007 election campaign -strongly berated Richard Bruton(FG) Finance Spokesman when Bruton drew attention to both waste and rocketing government expenditure. He can now claim retrospective vindication. Many in the media have spoken of Cowen in messianic terms.

In less than two years the ECB has raised Euro interest rates by 2%. This has knocked some of the fizz out of the housing market. Stamp Duty receipts have slumped and lay offs in the building industry are increasing rapidly. This crisis has been exacerbated by the failure of the Government to reform stamp duty. House prices are falling and negative equity looms on the horizon. Mortgage debt in Ireland is now €136 billion. There is also an astronomical level of credit card debt.

New house starts may fall to c 55,000 in 2008. The huge slump in property tax receipts looks set to continue in 2008. In addition a tightening up of bank/building society lending policies will further restrict the amount of credit available to house buyers. For too long the government has been over reliant on taxes from the property market to boost public expenditure. One eighth of the workforce is employed in construction. 20% of private sector workforce depends on construction.

Rising energy costs will reduce economic growth.This has implications for unemployment which is already rising. Rising unemployment will further depress tax receipts and damage consumer confidence.

For FG and Labour this was the election to lose.

Ireland-Sunday Independent savages Cowen once more.

The Sunday Independent appears to have a major problem with Brian Cowen. Prior to the General Election it flailed him mercilessly on the issue of Stamp Duty. It then swung in strongly behind FF in the three weeks prior to the election.

The attacks on Cowen have recommenced. Jody Corcoran today in a front page article calls him a "doom and gloom" merchant. Cowen expects a growth rate of 3.5% in the economy whilst NCB brokers expect a 5.5% growth rate. The Stamp Duty issue appears to be at the root of the attack.

When Cowen speaks he has the support of the cabinet including the Taoiseach. He is expressing the Governments view and not just his own. FF is now laying the ground work for the 2012 General Election.


There will be sharp cuts in public expenditure. Within three years the Government will once more have the wherewithal to loosen the purse strings. Public expenditure will once more rocket in the lead in to the 2012 election. A grateful electorate-suffering another dose of amnesia- will once more return FF. That is the FF expectation.


Prior to the 2002 General Election FF allowed public expenditure to spiral out of control. Having won the election Charlie McCreevy slashed public expenditure and introduced a raft of Stealth Taxes. By 2005 the Government was flush with cash. The purse strings were opened and public expenditure reached 13% in 2007. The Government duly won the election. After all the Irish people have short memories. The FF/PD/Green government is now about to adopt the same approach as was used after the 2002 General Election.


The Sunday Independent also carries a front page headline-"State Waste of €10bn in 10 years." FF led Governments are responsible for this. Why did the Sunday Independent support the outgoing FF/PD government?

Ireland-Uncertain economic outlook

Since the General Election there has been a growing realisation that the economic picture -as painted by the Government during the election campaign- is none too rosy.
In the course of the 2002 General Election campaign Charlie McCreevy denied claims from the opposition that cutbacks were inevitable. No sooner was the election over than massive cut backs and stealth taxes were introduced.
Roll on 2007 and we have a carbon copy of 2002. There is likely to be a €1bn shortfall in property taxes for the full year. There are predictions of a €1.5bn deficit for the central Government Exchequer this year. Election promises have been quietly shelved and cutbacks introduced. The Government has decided to slash up to €12 million worth of funding for rural roads as part of its programme of post-election cutbacks. The HSE is introducing cutbacks in an already underfunded Health Service. Patient care will suffer.
More cutbacks and stealth taxes are inevitable.
In 2002 the introduction of massive cutbacks and stealth taxes allowed the Government to accumulate sufficient financial resources to loosen the purse strings for a two year period prior to the 2007 General Election.
We can expect the same approach from the FF-PD-Green Coalition. Savage stealth taxes and cutbacks introduced in 2007 will allow the Government to accumulate sufficient financial wherewithal to produce a feel good factor for the two years prior to the 2012 General Election. The electorate has short memories.

The Irish economy is floating on a sea of credit. Rises in interest rates are hitting disposable income.
There was a significantly higher deficit of €3,271m on the current account of the Balance of Payments in the first quarter of 2007 compared to one of €2,325m for the same period in 2006.
The economy has been over reliant on building and construction.
Manufacturing industry is gravitating towards low cost economies. Much nonsense is spoken about Ireland's supposed advantages such as the English language and education system.
In India there has been a huge output of skilled graduates who are particularly attractive to Multinational Companies. The country with the largest number of English language speakers in the world is India. There is much waffle in Ireland about upskilling. There is an assumption that there is no upskilling in places such as India Hong King and Singapore.

When Government Ministers berated the opposition- in the election debates -they failed to address the issues that really matter.
The economic road ahead appears quite rocky. Brian Cowen will probably introduce a harsh budget in 2007.