Cowen: In Trouble After Lisbon

The Taoiseach Brian Cowen faced sharp criticism today following the latest Economic and Social Research Institute (ESRI) forecast, which predicts the economy will experience a recession this year for the first time since 1983.

Fine Gael’s spokesperson on Finance Richard Bruton, launched a scathing attack on Mr Cowen’s tenure as Minister for Finance, describing the ESRI commentary as a “damning indictment” of his record. 

Mr Bruton said the legacy of Fianna Fáil’s 11 years in power is a country where “rip-off prices are the norm and where frontline services are being slashed.

“The consequences of Brian Cowen’s neglect were to turn a €2 billion surplus into a deficit of €8 billion and rising, which has totally destroyed the Government’s room for manoeuvre in the public finances”.

Deputy leader of the Labour Party Joan Burton said the Government had to acknowledge the scale of the problems facing Ireland’s economy.

Ms Burton said the ESRI’s warning about the need to avoid a rapid correction in the exchequer position must be heeded, but that urgent action needed to be taken on the issue of job losses in the construction and manufacturing sectors.

Sinn Féin's spokesman on Economic Affairs Arthur Morgan said there was little public confidence in the ability of the Government to manage the current economic difficulties. He warned that "there must be no repeat of past mistakes such as the severe cutbacks in public services in the 1980s that we are still feeling the impact of today."

"The deterioration in the public finances has been stark and is a cause of great concern," he said.

The worsening economic situation was also expected to be discussed at a Cabinet meeting this morning, and Mr Cowen is also set to comment in the Dáil this afternoon.

The ESRI forecasts in its latest Quarterly Economic Commentary, published today, anticipates that the economy will contract in size by 0.4 per cent this year after growing by 4.5 per cent in 2007.

Economic growth is expected to resume next year with a forecast expansion rate of 1.9 per cent.

However, the ESRI said that this would not be enough to stem a recurrence of net emigration in 2009. The ESRI projects the numbers of people leaving the country will reach 20,000 next year, a level of net emigration not seen since 1990.

The ESRI also projects that the level of unemployment will increase by 60,000 or 60 per cent between 2007 and 2009.

From an overall budget surplus of €5.2 billion in 2006, the Government is expected to incur a deficit of €7.4 billion in 2009, a turnaround of more than €12.5 billion in the space of three years. 

The ESRI also estimates that house prices were overvalued by 12.5 per cent in 2007 and it projects a 6.3 per cent decline in house prices this year followed by a further 1.5 per cent fall in 2009.