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Analysis/Comment Last Updated: Aug 23, 2010 - 8:24:15 PM

Irish Economy 2009: ICTU and IBEC in driving seat should press for reforms; Cowen's framework a short-term band-aid fix
By Michael Hennigan, Founder and Editor of Finfacts
Jan 29, 2009 - 9:07:35 AM

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Leinster House, Dublin - seat of the Irish Parliament

Irish Economy 2009: News that the social partners led by trade union body ICTU and the employers’ group IBEC, agreed yesterday to begin detailed talks on the basis of a framework document that includes a commitment to finding spending cuts of €2 billion this year, is welcome. However, after the second period of monumental mismanagement of Ireland's economy, in a generation, ICTU and IBEC shouldn't just accept Taoiseach Brian Cowen's so-called framework plan. It is a short-term band-aid fix and there is no evidence of plans for serious reform.

Cowen thanked the social partners for their strong commitment to developing “an unprecedented approach to tackling the immediate economic challenges”. He said that stable public finances were essential for the future of the economy.

Cowen told the Dáil that over 100,000 Irish jobs will be lost this year andhe said there "is little point in looking back at how some of this might have been anticipated or avoided."

Like the collateral damage of war, neither Cowen or his ministers accept responsibility for the the tens of thousands of ruined lives. Yes the global crisis is a factor but a cocktail of short-term political interest, crony capitalism, negligence, incompetence and laziness, has left Ireland shockingly unprepared for bad economic times, after years of boom.

Finfacts Report: Irish Economy 2009: Cowen says Ireland facing most difficult global conditions in 70 years; Little point in looking back at what might have been anticipated or avoided

ICTU mainly represents trade unions with public sector workers, while IBEC represents both big companies and State commercial companies and a number of public agencies. Ideally, they shouldn't be in the driving seat. While the vast majority of the the part-time Dáil, have nothing of substance to say on the economic crisis, Cowen and his ministers appear to treat the parliament, with contempt.

Miriam Lord writes in the Irish Times today: "Call it arrogance. Call it ignorance. Call it avoidance. Whatever it was, from Brian Cowen down, they were a disgrace...Minister Noel Dempsey was astonishing."

Lord says: "Listening to Noel, in tribal full flow, you wouldn’t have known that thousands of people are losing their jobs every week and people the length and breadth of the country are petrified they might lose their homes.

Instead, he rounded on Fine Gael for having no solutions – not like when Fianna Fáil were in opposition. Enda Kenny’s party is “far more negative than Fianna Fáil ever was”. Clouds and cuckoos come to mind."

Dempsey hasn't much to lose. If he retires before 60 in 2012, the deadline for the next general election, he will get paid over €200,000 in his first year. Last year it was reported that he spent  €70,000 from public funds on a logo for the Transport 21 programme, as a logo that was designed in-house wasn't jazzy enough.

Fine Gael finance spokesman Richard Bruton said on Wednesday, that the framework was full of pious platitudes but devoid of decisions. “The framework does not chart the courageous course . . . it is a document designed to get everyone inside the tent, even the most disgruntled. The Taoiseach seems to have become so obsessed with the process of social partnership that he has lost sight of the objectives that he has to achieve,” he said.

He said it was long past the time for ritual dances. “People’s jobs are on the line, people’s businesses are on the line, people’s homes are on the line. The warm glow that will come from the signing of this agreement will be quickly overwhelmed by the chill winds of economic reality. We need a government that will make decisions, not stretch language to accommodate every possible interpretation of their intentions.”

Finfacts has highlighted the need for reforms ad nauseam- - how to avoid another housing bubble through reform of planning and the land rezoning system that makes farmers ultra-wealthy, who are already dependent on public funds for the majority of their income.

How to reform the bloated governance system (this is a separate issue to the reform of the public service) with little accountability and transparency, and a part-time parliament, which dates from the era of the donkey and cart, is a key area. It is also huge impediment to sustainable economic development.

Just think of the gombeen decentalisation plan in late 2003 when ministers in a luck-dip game, divided up departments and public agencies for their constituencies. That is a metaphor for Irish public governance as is the related system of crony capitalism, which we recently discussed.

In the Irish Times today, Rossa White, chief economist at Irish broker Davy writes: "With regard to public finances, there are serial boom and bust offenders around the world. Think of Argentina, Italy and Spain. Ireland has a foot in that camp. Twenty-odd years after beginning the process of restoring order to the government accounts, the country is back in the same nasty place.

We must not make the same mistake again. Once the deficit has stopped rising, the Government must design a framework to prevent a repeat. Policy should always be counter-cyclical – possibly aggressively so in the next upswing, for good discipline.

Here are two suggestions. Ireland adopts a properly functioning “golden rule” (borrow only to invest over the cycle) where, unlike in the UK, responsibility for dating the economic cycle passes to a newly-formed independent body free from political influence. After implementation of the rule, cyclically adjusted budget surpluses could be siphoned into a rainy-day fund, ready for when the economy turns for the worse next time around."

Irish writer George Bernard Shaw reputedly said in answer to a question on Christianity, that it might be a good thing if anyone ever tried it or as French writer Jean-Baptiste Alphonse Karr, wrote in 1849, plus ça change, plus c'est la même chose: the more things change the more they stay the same.

Can we ever dream that it could ever be any different in Ireland?

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