The Minister for Finance, Mr McCreevy, has given a clear indication that he intends to run a budget surplus in his 1998 Budget. He also continued to pour cold water on expectations of high levels of tax cuts in the December 3rd package. He insisted that efforts must continue to reduce the national debt burden.
Speaking at the Institute of Bankers' annual dinner in Dublin last night, Mr McCreevy declared that it was time to start running a budget surplus. He is expected to be able to report a surplus for this year and looks set to aim for another surplus in 1998.
He stressed that the Stability Pact requires that the Government's budgetary position be "close to balance or in surplus" in normal economic circumstances.
"Ireland is clearly growing faster than normal and, on this basis, it is time to start running a budgetary surplus," he said.
In a clear warning to the trade unions, Mr McCreevy also stressed the Government would continue to reduce the national debt and achieve "more ambitious budgetary targets" than have been achieved in the last decade.
Mr McCreevy also called for moderation to be shown by the social partners. The Partnership 2000 agreement must not be undermined, he said, through "unreasonable wage demands, calls for excessive reductions in personal taxation or inordinate increases in public spending".
The Minister also repeated his worries about inflationary pressures in the economy. He pointed to a tightening labour market and pressure on pay rises as well as rising house prices. "We have to make sure that the hard won gains of the past are not undermined by inflation."
The institute's president, Mr Harry Lorton, welcomed the spectacular growth in the economy in recent years. But as a "true banker", he sounded a note of caution.
"As a nation, we must beware of complacency. Yes, we've achieved a large measure of success but we must not believe that we've addressed every issue or that we'll never see tough times again. The dramatic events in world stock markets this week illustrate just how quickly things can change.
"As bankers, we know that all the bad loans have not been written and that the present, historically low levels of bad debts will, as night follows day, trend upwards at some point in the future," he said.
Great care must be taken to ensure the economy's strong performance was continued and enhanced and that the benefits were felt by all. Issues such as the pace of tax reform and the restructuring of the public service lay at the core of the future growth, he said.
EMU would exacerbate the current trend of margin erosion in banking and would bring in new competitors, he said.
