A National Government for Ireland?

There is a view among a large section of the population in Ireland these days that the situation we face is so serious it’s time to put party politics aside, get all the politicians together and form a national government.

A lot of people have come to this conclusion because they realize we are facing an economic crisis of unprecedented proportions, and that the usual point scoring and squabbling that goes on between the political parties has become irrelevant.

We don’t have time for that anymore. And there’s actually not that much to argue about anyway, because we have run out of options as well as money.

We have to implement a program of severe cutbacks in state spending over the next four years. If we don’t, the country will go bankrupt. It’s that simple, and it doesn’t really matter which party is in power because it won’t change that reality.

So the era of political point-scoring should be over. But the stupid squabbling is not the only problem.
Another problem is the lack of talent. Looking across the main parties here, people see very few politicians with the ability or experience to cope with the enormous challenge we face. So why not put the best and the brightest from all the parties together to form a crisis cabinet to get us through this mess?

Of course that’s not going to happen. For one thing our constitution makes it difficult. But there are a lot of people here who think it should happen.

That’s why the leader of the Green Party -- the junior party in our present coalition government with Fianna Fail -- made vague proposals along these lines a couple of weeks back.

Mind you, he did not propose a cross-party cabinet. He was talking about consensus politics rather than national government, about establishing cross-party agreement on the painful measures that have to be taken to deal with the crisis.

Initially, Taoiseach (Prime Minister) Brian Cowen and the Fianna Fail party were very cool about the idea, but last week Cowen wrote to the other party leaders inviting them to talks this week about the crisis. And in preparation for that, the opposition leaders were in the Department of Finance on Monday for an in-depth briefing on the state’s finances.

The other party leaders are suspicious that this is merely an attempt by Fianna Fail and the Greens to cling to power, or at least to avoid total wipeout in the next election by spreading the responsibility for the ferocious cutbacks that are coming. And no doubt that is part of their motivation.

But in spite of the difficulties this unprecedented situation presents for the opposition parties, it is vital that there is agreement between the government and the opposition on the program of cutbacks for the next four years. It is vital because unless the money markets know that all the political parties here are committed to cutting back and reducing our huge deficit, they won’t lend to us in the future.

If there is cross-party agreement on what needs to be done and how it is to be done, there is certainty. The EU is strongly pushing Ireland to develop this cross-party approach, and the markets demand it because they can’t take the risk that a change of government might bring a return to our bad old ways.

The extent of the crisis facing us is immense. You will remember that a few weeks ago the Irish government had to suspend any further auctions of government bonds until next year because the markets wanted almost 7% interest.

Fortunately we have already borrowed enough to keep us going until the middle of next year. So we have a few months to try to convince the markets that we are capable of getting our spending under control and of reducing our massive budget deficits. If we can do that, they might start lending to us again at a more reasonable interest level.

To convince the markets we are serious that the government will outline its four-year budgetary program in two weeks, there is a program which will list huge cuts in state spending here. The first package of cuts will come in the budget for 2011 which will be presented to the Dail (Parliament) on December 7.

The four-year program is designed to cut our budget deficits to 3% of national income by 2014. That’s what we have agreed with the European Union, and it is EU money that is keeping us going at the moment.

In spite of the cuts made in spending in last year’s budget, we are still spending over a third more than we raise in taxes. This year we will have to cut much more severely, partly because we now have to fund the interest on the bank bailout on top of the interest on our soaring national debt.

If we fail to implement the cuts we would very quickly get to the point of national collapse, because we would not be able to borrow any more through bond sales. That would trigger an IMF/European bailout (like in Greece), which would mean the loss of economic sovereignty and huge reputational damage. And the program of cutbacks would then be implemented anyway, and probably even more severely.

The damage to us as an open, trading economy would be enormous, and inward investment would be badly affected because of the perception that social unrest and riots might be on the cards.

The bottom line is that we are spending almost €20 billion a year more than we take up in taxes, a deficit which is well over 10% of national income. That is unsustainable. We have four years to get it down to 3%, the maximum figure allowed among the EU countries.

Even doing that to the agreed time scale means that by 2014 we will have added an extra €40 billion to the national debt. To be able to borrow this we have to be seen to be making substantial progress on cutting our deficits very quickly.

One leading economist here has calculated that by the time our 3% deficit target has been reached, three-quarters of our national debt at that point will have derived from accumulated budget deficits and one quarter from the banking collapse.

So although our banking crisis is seen by most people here as the cause of all our troubles, the bigger factor is the huge deficits we are running because of our tax revenue collapse and our failure to cut state spending to match.

Last week a team of European officials visited the Department of Finance in Dublin for talks about the four-year budget plan. We are being told that these are just “normal” meetings, to which all one can say is, “Yeah, right.”

The fact is that the EU is now closely monitoring everything the Irish government is doing as it battles to bring the deficit under control. The cutbacks the government is going to implement in the budget in December will have been costed by the EU to be sure they are sufficient.

And it’s not just the EU officials. The finance ministers of all the euro zone countries were meeting this week, and they too were briefed on the steps that Ireland is going to take to get back on track.

All of which is very embarrassing from a national perspective. We’re like the spoiled brat of a large family who has got into trouble, and the parents are discussing what to do with us.

Part of our problem, of course, is that our politicians are not really up to dealing with the crisis we face. As well as some kind of cross-party economic consensus or national government, we should make it a requirement that the economic ministers in a crisis cabinet must be people who have run major league companies.

That would mean appointing ministers who are not now in the Dail. But desperate times require desperate measures, and we really are in a desperate situation.

The senior politicians in the various parties now are mainly ex-teachers, small-time lawyers, some professionals and the odd farmer and small businessman. What they have in common is a complete lack of experience of international business. Yet they are facing a complex economic crisis that would test the ability of the CEOs of the 20 biggest businesses here put together.

So it would make a lot of sense to bring people with international business experience into the government until we get through this crisis.

But that’s not going to happen either. The decisions that will determine the future of the Irish economy will continue to be taken by the former schoolteachers and solicitors who make up the government at the moment.

To which one can only say – thank God for the EU!