Immigration Honesty Is Best Policy
Exactly how bad the situation is will be known on Wednesday of this week when the half yearly figures for tax revenues are published. The figures are likely to make grim reading, and proposals for a pay freeze for state workers and for cutbacks in the government's planned capital spending program are already being put forward.
From the noises already being made by the government, it seems that state borrowing will increase but that the EU borrowing limit will not be breached. The new Minister for Finance Brian Lenihan has said that it would be a mistake to break the borrowing limit of 3% to pay for day-to-day spending.
What this means is that there are tough times immediately ahead in Ireland. Already the accusations are flying that the government wasted the economic boom, and there is a specific reference to this in the economic report.
Certainly it now seems clear that the way former Taoiseach (Prime Minister) Bertie Ahern's government continued to feed the boom in recent years, largely on the back of the unsustainable property boom, was misguided. With the collapse of the property market, the massive public finance surplus on which the government based its promised national development plan will have vanished by next year.
Not only that, but we will be struggling to pay for basic services for our new enlarged population. And on top of that, the ESRI says, emigration will be back in a big way with net emigration exceeding 20,000 a year over the next few years.
This latest quarterly economic report from the ESRI pulls no punches, deliberately using the recession word and predicting that this year the economy will contract by 0.4%. This is in marked contrast to recent predictions from some other economists who until recently were still saying that there would be 1% or 2% growth in the Irish economy this year.
Consumer spending here is going to be hit, the ESRI says, with after tax income down by 2.6% this year, the first annual reduction since 1983. And that will feed into the economy, with declining consumption. The global slowdown will also hit our exports and the building slump will continue here, drastically affecting unemployment numbers and tax revenues.
Coming back to the Lisbon Treaty, it is in that depressed context that the government may have to attempt a rerun of the referendum next year, which is not a very inviting prospect.
The fact is, as Taoiseach Brian Cowen has said, there is no future for us outside of the EU. That is simply unthinkable. Any attempt to "go it alone" would make the future prospects for the Irish economy even worse.
So we have to find a solution to the anti-EU feeling that exists here and that goes far beyond dealing with so-called irrational fears. If I were advising the government I would be telling them to deal with the immigration issue.