Think back to the last time voters went to the polls. In the two years running up to the 2002 election, Ireland's fiscal position deteriorated more rapidly than that of any other eurozone country in the past decade: once the votes were counted, the brakes had to be slammed on to prevent a rapid descent into deficit.

Operating fiscal policy in this manner is doubly bad.

Jerky spending patterns are inherently inefficient, playing havoc with departmental planning and generating all manner of additional costs. Worse still, economic growth and stability are put at risk.

If loss of fiscal control in the run-up to the last election had coincided with an economic slump, as happened in the late 1970s, the result could have been a 1980s-like depression. And there was a real risk of that happening. In the early years of the decade, the world economy suffered a sharp downturn. Had it been tipped into recession by the shocks at the time . . .

the bursting of the dotcom bubble in March 2000 or terrorist attacks in the US 18 months later . . . the unusually open Irish economy would have been sent reeling.

The risks are, if anything, greater now. Internationally, currency misalignments, large current account imbalances, asset price bubbles and high oil prices are just some of the causes for concern. At home, nearterm risk is centred on the property market and mortgage indebtedness.

Given the number and magnitude of economic threats, this is no time to play politics with the public finances. The government got away with it the last time: for everyone's sake, it is to be hoped it does not tempt fate again.

The government should also pay heed to the IMF's umpteenth call for the modernisation of the archaic budgetary process.

To do so would kill two birds with one stone: it would make the fiscal framework better able to cushion the economy in the event of a shock, and cut down on the great deal of taxpayers' money that is wasted.

Though some efforts are being made to remedy structural failures, the McCreevy Rule . . . "if I have it, I'll spend it" . . . remains the government's organising principle for the public finances. Brian Cowen has shown little sign of applying greater rigour to taking care of taxpayers' money.

It's not hard to see why.

Moving towards international best practice in managing the public finances means that ministers relinquish some power, either by sharing it with others or placing constraints on their own freedom of manoeuvre, so that the temptation to use taxpayers' money for shortterm political is circumscribed.

Foregoing control is not something any politician does lightly. But, in recent times, governments internationally have moved in this direction because the costs of bad economic management have become too obvious to ignore.

The history of monetary policy illustrates this best. In the past, governments who controlled interest rates couldn't resist using them for political purposes. This did indisputable damage to economies. However reluctantly, ever more finance ministers have given up control of monetary policy, handing it over to independent central banks.

Because the devolution and depoliticisation of monetary policy has been an unquestioned success, the pressure has grown to put frameworks in place to prevent politicians abusing other economic policy powers.

Although no country has created a fiscal equivalent of an independent monetary authority, most eurozone countries give an important role to independent institutions outside finance and economics ministries.

Academic think-tanks have been mandated by law to carry out some of the functions traditionally carried out by finance ministries . . . usually without transparency.

Dull as it sounds, this includes: generating macroeconomic baselines for budgets; providing revenue and expenditure forecasts; analysing and evaluating policy and spending programmes; and making recommendations on the maintenance of fiscal stability in the short, medium and long terms.

In Ireland, the Department of Finance, operating in splendid isolation, is tasked with doing all of these things, despite being underresourced. Even if its political masters wished, it would not be in a position to carry out the full range of finance ministry functions effectively. Most worryingly for taxpayers, it is far from having the capacity to conduct ongoing and rigorous evaluation of all spending lines, which would save so much money now wasted.

Structural changes to how taxpayers' money is managed could be accelerated by adopting international best practice and outsourcing a chunk of the work that Finance cannot do effectively to an independent institution.

The Economic and Social Research Institute (ESRI) is an obvious candidate to do much of that. It is chocka-block with brainy economists and has a fullyfledged economic forecasting capacity. Its Switch model provides government departments with analysis on the redistributive effects of policy. And ESRI is currently undergoing a shake-up that may make it ripe for new responsibilities.

Outsourcing Finance functions would free up department officials to develop greater expertise, introduce greater transparency and add credibility to the entire process . . . allowing business to be more certain about the fiscal future and, thus, more willing to invest.

Alas, there is no sign of Brian Cowen planning to do as nearly every other European country does.

Nor is he showing greater enthusiasm for leading the reform process than his predecessor. Worse still, there are some indications that we're slipping back.

One of the few areas where best practice has been the norm . . . because of external pressure . . . is the planning and evaluation of capital spending. As Ireland got billions from Brussels, Eurocrats insisted on proper analysis and evaluation before, during and after expenditure.

The hope was that these good habits would spread to current spending, but now that Ireland relies far less on EU cash and fingerwagging eurocrats impose less discipline, bad habits seem to be creeping back in capital spending.

Two recent government plans with major capital spending implications, decentralisation and Transport 21, don't appear to have been subject the sort of scrutiny that would accompany best practice.

Modernising the management of the public finances is urgently needed.

Other small countries in Europe facing problems of limited resources have shown the way. Ireland should follow.

Dan O'Brien is a senior editor at the Economist Intelligence Unit danobrien@economist. com