Wednesday December 02, 2009. Pictured at the launch of the report of the High Level Action Group on Green Enterprise were Eamon Ryan T.D, Minister for Communications, Energy and Natural Resources, Joe Harford, Chairperson, High Level Action Group on Green Enterprise with Taoiseach Brian Cowen, T.D and Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan, T.D.

In its Weekly Market Comment, Davy says the Irish economy is heading back to somewhere between the 2004 and 2005 size (in GNP cash terms) next year. Separately, the conventional household spending model may be in the process of a permanent change in developed countries.

 Rossa White, chief economist, says that in 2005, the public sector pay and pensions bill totalled €15.4bn. By 2009, it had reached €19.8bn, an increase of €4.4bn. About half of that jump resulted from inflating wages (and hence pension entitlements) and the rest of the bill from increasing the numbers employed.

White says that Ireland's structural deficit is somewhere between 8-9% of GDP, based on Davy's estimates. In other words, if the economy was operating at full capacity tomorrow, the country would still be left with a deficit of that magnitude (borne out of the failure to control current spending). That compares with a likely deficit of close to 12% of GDP this year.

Since 2005, direct property-related receipts have declined €5bn since 2005. He says the public pay bill must be cut by a similar magnitude to help close the structural gap. While the Irish public sector size is not too out-of-line in employment terms with the rest of Europe (keeping in mind Ireland's low defence and age-related spending requirements), the problem is that we pay public servants over the odds. If we were to cut employment by the 17,000 that the Colm McCarthy-led Bord Snip spending group recommended, wages would have to fall about 10% in order to generate savings of €3bn from the public pay bill in total.

Rossa White says it is best to frontload those cuts so that public servants can plan with more certainty their new level of income.

John O'Reilly reports that changes in consumer patterns during the recession, as evidenced by reports from the US and UK of increasing home meal preparation and a growing demand for cookery classes, may signal more than a reaction to income pressure may be taking place. He says many of these behaviours may come to have a meaning or value which transcends their measurability in money. He says while falling income may have catalysed these changes, it is far from certain that rising incomes (though the duration of income pressure may be significant) will see their reversal.

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