THE GOVERNMENT should not be fixated with adhering to its undertaking to keep borrowing within 9.5 per cent of Gross Domestic Product (GDP) in the Budget on April 7th, the new economic adviser to the Minister for Finance said last night.
The NUIG academic, Dr Alan Ahearne, told the Fianna Fáil parliamentary party that it was more important for the Government to set out how it intended to restore the economic situation over the next three years. In January, the Government made a commitment to the European Commission that it would keep borrowing to within 9.5 per cent of GDP.
Dr Ahearne was appointed as economic adviser by Brian Lenihan earlier this month. Last night, he gave a detailed presentation to some 100 Fianna Fáil TDs and Senators at its weekly parliamentary meeting.
He also said that Ireland could not afford a stimulus package and that its main objective should be to address the serious structural deficits – as opposed to cyclical deficits.
Next month’s Budget, he said, needed to be credible and multi-annual, setting out a detailed plan from 2009 to 2011. He also said that the Government would need to address politically sensitive areas when applying cuts, including social welfare and pays.
He said that the experience in other countries in recession in the past had shown that cuts in current spending had led to quicker recovery. He also argued that the Government would need to adhere to whatever package it presented to the Dáil in early April.
The Taoiseach Brian Cowen did not disagree at the meeting with Dr Ahearne’s statement. But the economist’s analysis differs from that of the coalition partners, the Greens. Party leader John Gormley said earlier this week that the Government would stay within the 9.5 per cent borrowing limits.
The Government Chief Whip Pat Carey said a number of TDs and Senators had commended Mr Ahearne on the quality and clarity of the examination.
He said that the Taoiseach Brian Cowen had also told the meeting that all areas of expenditure need to be examined to achieve savings.
In his address to the meeting, Mr Cowen told deputies that everybody would be left less well off after the Budget. He said one of the vital issues facing the Government was ensuring that it was fair for all sections in society.
According to several TDs who were present, Mr Cowen made it very clear that social welfare cuts will be on the cards as well, and also said the Government would need to condition the public to prepare them for the austerity measures that the Budget will contain.
He told his party colleagues that in tandem with cuts, the Government would move assertively to drive down costs and prices. He said that while take home pay may be lower, people will have more buying power.
