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News : Irish Economy Last Updated: Oct 29, 2010 - 6:38:43 AM

Ireland Four Year Plan for Budgets: 1997; "For years we have been bled white - now it's payback time" 2011-2014; The real payback time
By Michael Hennigan, Founder and Editor of Finfacts
Oct 27, 2010 - 8:04:25 AM

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Source credit: www.irishnewsarchive.com

Ireland Four Year Plan for Budgets: On June 05, 1997, the Irish Independent famously ran its front page editorial titled  - - "For years we have been bled white - now it's payback time" - - a day preceding the general election, and more than 13 years later on December 7th next, Budget Day, the beneficiaries who have brought economic ruin in the interval, will begin to deliver a payback to the people. Ignorant politicians, aided and abetted by vested interests in a democracy of many shortcomings, travelled on the road to perdition and blew the best opportunity ever, to put the Irish economy on a sustainable course. Now the people face the real payback time in the four years, 2011-2014.

The tale of feast and famine would be bad enough in the short history of self-government, but this is the second time in a generation when reckless mismanagement of the economy, has brought misery to tens of thousands of Irish citizens while the main culprits have lived afterward on generous State benefits for life. The epilogue is no different now as those in particular who are not protected by one of the vested interest bodies - - mainly private sector workers -- which have paralysed the governance of the State, will bear the brunt of the financial rescue of the country.

The Government's announcement on Tuesday that an overall fiscal adjustment of €15bn over the next four years is warranted in order to achieve the target deficit of 3% of GDP by 2014, is at least a signal of an end to denial and slow motion.

It also provides the potential for some stability as no business would invest in a situation of permanent crisis and uncertainty.

Besides, at the next general election, parties cannot avoid the issue of reform of the outdated British structures, which provides Ireland with a part-time Parliament (Oireachtas) of 216 members where during the current crisis, most of them have not only not inspired, but had absolutely nothing to say.

The Government is assuming average annual growth of 2.7% in the period 2011-2014 and the urgency of addressing the jobs challenge is even clear from the expectation of much lower growth in the first year of the four-year plan.

The Economic and Social Research Institute said last week that it expected national income (GNP) growth of 2% and 2.25% in output (GDP) in 2011, while Davy Research forecast on Tuesday that GNP will rise by only 1.2% in 2011 and GDP by 1.9%.

In H1 2011, growth in US gross domestic product is expected to be close to an annual 2% rate.

Of course it was not only politicians who were  responsible for the crash of the Celtic Tiger boom and in coming weeks, European Commissioner for Economic and Monetary Affairs Olli Rehn will visit Dublin to brief social partners on the financial debacle facing  Ireland.

A decade ago, when Bertie Ahern, Mary Harney and Charlie McCreevy believed that they had found the recipe for the free lunch, the European Commission and European Central Bank were told where to get off when they censured Ireland on the need for budgetary restraint.

Economists such as Jim O’Leary, Dan McLaughlin, Eoin Fahy, and Alan McQuaid all called for cuts in both the top rate of tax and the standard rate, with ABN AMRO’s Dan McLaughlin pointing out that the old target rates for income tax of 40% and 20% should be replaced with new medium term targets of 30% and 10% respectively.

Tánaiste Mary Harney, the PD leader who was the biggest cheerleader for tax cuts in the Cabinet, claimed that other countries would regard the Commission's censure as "bizarre.”

The Director-General of the employers' organisation IBEC, Turlough O'Sullivan, described the censure as "alarmist", while the trade unions' congress, ICTU, said that it appeared to be based on a misunderstanding of the level of development in Ireland.

Crucially, an MRBI opinion poll in the Irish Times showed that more than seven out of ten voters believed the 2001 Budget was good for the country.

The poll, the first since the Budget, showed a significant increase in the popularity of the Government and a big rise in satisfaction with the coalition leaders. Some 58% were satisfied with the Government's performance, up 15 points since September 2000.

Harney had said in the Dáil Budget debate in 1998: "Cutting taxes has been the key to Ireland's tremendous economic performance.

"We have cut taxes on labour, on capital, on companies. We have given huge tax breaks for investment in films, in urban renewal, in the development of tourism.

Socialists don't believe in low taxes; they believe in high taxes. Right now the biggest threat to our continued economic prosperity comes from Socialists, European Socialists who are envious of our low-tax regime and who want to foist on us the kind of punitive tax rates that have saddled them with massive unemployment. Socialism has never been very popular in this country and the last thing we want to do now is import it from Europe.

This Budget is another major step on the road to tax reduction and tax reform. As long we in Ireland keep on that road we will continue to prosper."

The truth is that the biggest threat to Ireland's prosperity, came not from European Socialists but from Mary Harney and her colleagues, who have brought the misery of "massive unemployment," to tens of thousands of people. Her fairytale economy was built on a property boom and an exporting sector where American firms were responsible for 90% of the total, while the derided Socialists, such as the Finns, Swedes and Danes, have built their own world-class exporting companies.

The leading US firms: Intel, Microsoft, Oracle, Dell, Hewlett-Packard, Pfizer, Boston Scientific, Wyeth, Eli Lilly and many others, had opened operations in Ireland, before 1997, when McCreevy with her support, set fire to the economy. In seven years as Minister for Enterprise, Trade and Employment, how did the indigenous exporting  sector fare under her stewardship?

May 2009: Irish Economy: The 2001 economic consensus that paved the road to economic ruin

FEB 2010: Davy says Ireland was never a wealthy country; High income in 2000-2008 largely wasted

Apr 2010: Irish Economy: Ahern, Harney, McCreevy, Cowen and the other individuals/groups with responsibility for the economic crash

Oct 2010: The invisible Irish unemployed and the challenge of creating 180,000 net new jobs

Oct 2010: Ireland can choose a path to greatness or perdition

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