Ireland faces "much tougher" economic times over the coming year, or two, Taoiseach Brian Cowen has warned Fianna Fail TDs during a key meeting in advance of the resumption of the political season.
"There is no doubt – in keeping with most in the western world – that our economy faces much tougher times. Regrettably, but not surprisingly given the overall situation, unemployment is rising as well, although from a lower base than was the case in previous times of economic difficulty," he said.
During a lengthy address to his FF Parliamentary Party colleagues, Mr Cowen made little attempt to hide the scale of the difficulties ahead, while invited economists highlighted the dangers if the Government takes the wrong decisions now.
"No one should underestimate the scale of the challenge that faces us. We are in new economic territory. No one should think that it will be easy to overcome and no one should think that any politician, any economist or any leading figure in business has the easy solution.
"This is far too serious to simply be a political challenge, a political battle to be won. Our job is to plot the right course and to recommend and encourage the active participation of all stakeholders in our society in pursuing that course in order to restore a positive economic climate," he said.
Calling for solidarity amongst Fianna Fáil TDs, Mr Cowen made clear that the party's ability to handle the crisis is dependent upon it maintaining discipline before and after next month's Budget.
The Parliamentary Party is meeting in the Clayton Hotel on the outskirts of Galway today and tomorrow in advance of the reopening of the Dáil later this month, in common with all other political parties.
"It's important, when things are as difficult as they are and when the reasons are as numerous and as complex as they are, that we do everything possible to maintain confidence and sustain investment at this difficult time," he said.
Pointing out the significance of the Lisbon Treaty referendum rejection, Mr Cowen said: "It is increasingly obvious to me that our economic difficulties and the political dilemma posed by the Lisbon Treaty are linked.
“We failed to address some people's genuinely held concerns and we failed to get the message through that a rejection of the Treaty could exacerbate the already tough economic situation we find ourselves in. We need to address these failings in getting more of the people to see the imperative for Ireland to be fully engaged with our partners in the European Union."
He went on: "There has been a rapid slowdown in the global economy arising from turbulence in global financial markets and the credit squeeze, faltering economic growth in the major economies, exchange rate shifts and the sharp rise in oil prices. No one yet knows what the full extent of these adverse developments will be or how quickly stability can be restored to the financial and equity markets worldwide.
“As we've seen only this morning, the continuing crisis in the global banking sector adds greatly to the complexity of the problems we face. These are unprecedented times in that respect.
"The facts are simple. We're an open economy. We depend on exports as a major driver of our economic success. This inevitably means that our exposure to these international factors is greater than for a good number of other countries.
"Some domestic factors are also at play. At home, we've had a rapid slowdown in the housing market. House prices and rents are becoming lower and more affordable. However, the abrupt nature of the slow-down has had a dramatic effect on tax revenues such that Government has considerably less to spend.
And he added: "I believe that the people will respond through the more challenging economic and general societal times that lie ahead. I am also sure that the people want us to navigate these choppy waters over the months and years ahead.”
He said Ireland had “invested wisely” in schools, roads, public transport, communications and housing, “giving us one of the highest rates of public investment in Europe”.
Defending the Government's record, Mr Cowen said: "The credit crisis continues to unleash havoc in industries and countries right the way across the world. The very existence of some of the biggest names in global financial services is now under threat.
“This is a storm beyond the initial expectations of policymakers everywhere and its effects are being felt in homes and businesses the world over," he said. The Taoiseach said hindsight was “a wonderful gift, but it is a mythical one”.
“The Government will have to take tough decisions because of the economic slowdown. No politician likes doing so but we are not going to try to buy short-term popularity and put at risk all the gains of the past decade.”
Minister for Finance Brian Lenihan has already told his Cabinet colleagues they must shave 2 ½ per cent off this year’s figures when compiling their 2009 spending priorities, in advance of the October 14th Budget.
