Rising to present the most feared budget in the history of the state last week, finance minister Brian Lenihan took the public by surprise when he declared "the worst is over". Then after detailing savage cuts in social welfare and public-service pay he concluded that "we have turned the corner".
The Sunday Tribune asked a number of economists, business people and public representatives whether they agreed with Lenihan's rosy view of the country's current plight.
It was a tough budget and it had to be because of the circumstances we find ourselves in as a result of loose monetary policy in places like the US and the excessive expenditure of our own governments.
On the income side we couldn't keep up such spending and we had to keep these corrective measures.
When it is seen that leadership is being given and people know where they stand, however bad things are and however angry they are, people begin to make plans accordingly.
Every section of society has to make a contribution. No politician likes to make social-welfare cuts but at the end of the day while 4.2% is a lot to cut off social welfare it is the cost of a packet of cigarettes in the end even though the cuts are hard for those on social welfare.
As long as people know where they stand, people can see that we are turning the corner. Hopefully interest rates will stay low and leave money in people's pockets.
Unless the world economy in areas like the US begins to improve, we can't improve as we are dependent on exports.
But there are signs of an improvement abroad within the next six months. We will be behind that, but if it starts to happen abroad it will happen here and on that basis the minister is right in what he said.
I don't agree. I found his statement extraordinary. The reality is we are going to see further job losses next year. One reason the numbers signing on the live register have bottomed out is that people who have lost their job are leaving the country. Also, those on jobseekers' allowance are being taken off the register.
There are no guarantees that countries we export to are going to recover sufficiently to have an effect on employment here. In Finland, for example, it took years after the economic recovery for employment to get back up.
I'm very concerned the government is not doing enough to help the unemployed and what they are doing will not solve the unemployment problem.
Maybe the worst is over from Minister Lenihan's point of view in that he has achieved his €4bn cut in the budget on top of further cuts earlier in the year. At least this will stanch the requirement to borrow, but I think it is a little premature to say the worst is over.
If the world comes out of this recession, because of the particular situation here with the banks it will take us longer to recover. I remember the 1980s and there was a long tail on that recession. It will be the same this time.
It's difficult to say how long it will take but it will be the end of 2010 before we can even say whether things are improving or not.
We [the business community in Dundalk] have not turned the corner. We have done what we can to fight back against cross-border shopping, but unless we get the fundamentals of the economy right we can't win. We can slow the damage but we can't turn the corner. There is still too big of a differential on booze to make a significant improvement.
The main problem retailers here, south of the border, have is the price of drink. Decreasing the price of spirits in the budget does not solve the problem as there is still a large differential in price.
I accept the need for €4bn in cuts, but the way in which he made these adjustments will damage the economy and is bad for social development. I think this government is seriously out of touch with the people.
Giving billions to the banks in the hope they will lend is a nonsensical approach. Instead, why can't we buy back the ICC bank, which was set up by Sean Lemass precisely to lend to Irish businesses?
A big problem is the lack of capacity for small and medium enterprises to borrow from the banks and the government hasn't addressed that at all. This is just more rhetoric which is not backed up by reality.
I certainly haven't noticed any green shoots of recovery around the place and if they were there then this budget has thrown weed killer over the lot of them.
There was a cohesive approach by Minister Lenihan in the budget to suppress wages right across the economy. I believe this approach goes back to Lenihan's address at the Glenties summer school when he talked about the need for a cut in the minimum wage.
This budget will deflate the economy and I fear that it will turn a recession into a depression.
I'm inclined to think the minister is more right than wrong. Certainly, in terms of turning the corner on the public finances, Minister Lenihan is right and growth will return later in 2010.
But growth in employment will take a little bit longer. There will be more job losses next year so in that sense Lenihan is wrong about the worst being over.
This was a grave budget and public servants in particular had to take some medicine. But you have to remember it's a wage cut, not a job cut.
In the SFA's Winter Business Sentiment Survey [conducted November 2009], 70% of small companies rate the overall business environment as 'poor' or 'very poor'. Therefore, I do not believe the minister's statement that the worst is over. Small businesses are still struggling to survive, and are primarily focused on trying to regain their cost-competitiveness, which demands reductions in labour costs, overheads, input costs, electricity and other energy costs, local authority commercial rates and regulatory/ administrative burden (the latter three of which are all government-controlled). However, I do believe that we have turned the corner with this budget, in the measures that have been taken to address the fiscal deficit and the steps being taken to reconcile the state's income and expenditure with the least long-term damage to the economy.
It is clear that the worst is not over for the construction industry as a whole and the 200,000 people who directly or indirectly earn their living in the industry. The cut of almost €1bn next year, in much needed investment in vital infrastructure such as schools, health facilities and transportation, will be a huge blow to the communities they were designed for and the thousands of construction workers who will join the live register as a result.
I think the worst-is-over comment was more of a rhetorical flourish than a statement to be taken too seriously. Budget speeches need to conclude with some class of positive comment – remember the 'call to patriotic action' last year? At the same time, he's admitting that the economy will still be contracting in the next six to nine months and that the unemployment rate will go up.
Perhaps Lenihan means that the worst is over in the sense that, while he's planning further restrictive budgets, the amount to be cut over the next two budgets – €3bn each year – is less than the adjustment he had to make in this budget. But I don't think even the minister believes that the economy will be much better next year.
Politically and socially, the greatest danger for Ireland comes from national bankruptcy. Given the size of hole in the country's public finances and the fragility of the international financial system, that is a real risk in 2010 and beyond. Wednesday's budget will have the effect of reducing that risk. It should have been done much sooner, but better late than never.
The protracted delay in getting to grips with the fiscal crisis has severely eroded Ireland's credibility, leaving it linked with Greece as the country considered riskiest to lend to in the euro area. The dangers of this were to be seen on budget day – despite taking the right measures, the de-facto interest rate on Irish government borrowing rose because Greece continues to slide towards bankruptcy and it is dragging Ireland with it.
No, I don't agree and I worry about the optimism on their figures. The government appears to have a rose-tinted view of the effects of the budget which will have a double-negative effect on the economy. Firstly, the cuts in pay and social welfare will reduce people's purchasing power while, secondly, it will jolt consumer confidence.
Private sector workers anticipate further taxes next year, possibly in property and water charges, and this creates uncertainty.
Also, the fact that the numbers on the live register have peaked masks the fact that people are leaving the workforce altogether. Maybe things have bottomed out but we are not showing any growth and will stagnate for a while yet.
Yes, I do believe it. He has dealt with the public finances and addressed competitiveness, something which we need to continue to focus on. We have to get our cost-base down. But the banking situation will be crucial.
Unfortunately, next year a lot of hotels will have to be taken out. This will be painful. The hotel industry will have a difficult winter this year and next year but we are starting to get out of it.
This puts us on the right track which will allow us to react to an upswing in other economies.
But I hope that the public sector unions don't derail the recovery.
In May, the ESRI published its review in which it said that the government needed to make €4bn in cuts in this budget and significant further cuts in the years ahead in order to lift the country out of the recession.
So, Minister Lenihan is right in that the budget is an important step. However, it will be 2011 before we see a return to growth.
The absolute worst is over and the budget was as good an outcome as one could expect.
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