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In the Eye of the Storm

Find out what Brian Cowen thinks is in store for Ireland in light of the global financial crisis and the government's unpopular decisions on medical cards and education cuts.

Jason O'Toole, 06 Nov 2008

The opposition’s interpretation of the deficit differs from your government’s…

Enda Kenny has brought forward an alternative budgetary strategy through his finance spokesperson Richard Bruton, which says that our deficit should be 5.5% GNP and not 6.5%, as we have presented it. That’s another €2,000 million in cuts, or higher taxes. He hasn’t identified where those cuts are to come from – although he’s berated me for any cuts that we’ve brought in. The second point is that his spokesperson for finance also said that they wouldn’t raise taxes – that’s another €2billion he has to find. Now, if he’s not increasing borrowing and he’s not increasing taxes, the only place he can find that money is more expenditure cuts. They’re the only three options you have.

There are whisperings of a so-called mini budget next year. Is there any truth in this?

We are just finishing our budget for 2009. However, it is true to say – and let me make this point to be straight with people – that every budget is based on economic assumptions. And we are making the best call we can make based on present circumstances. This time last year there was no financial institution or economist that suggested we’d have negative growth in Ireland this year. The most pessimistic forecast was about 2.7% growth from the ERSI and the most optimistic forecast might have been from the Central Bank at 3.5% percent. We ended up suggesting it would be 3%. It was none of those figures. It was minus 1.2% or 1.3%. Economic forecasting by its very nature is not an exact science. This major shock has come during 2008. It’s a huge economic shock. The one thing we can say is, the financial crisis and its impact on the real economy – its full impact – is not yet fully known by everybody. We have to work our way through this situation, week by week, month by month. And make whatever decisions are necessary in the interest of keeping the reputation of Ireland high, as a place to do business, that is open for business, and that has the policies and the framework in place that is recognising the new situation we’re now in.



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