Taoiseach Brian Cowen and Central Bank Governor John Hurley have issued stark warnings of hard economic times for Ireland next year.
Speaking during a radio interview this morning, Mr Cowen said there had been a “fundamental fracture” in the world’s financial system.
“We are now going to face into a few years where the standard of living will drop,” he said during the interview on the Gerry Ryan show this morning.
“We have a problem. It is a serious problem. Unemployment will go up in the short term, that's for sure.”
Full-year Exchequer figures due early next month are expected to show an €8 billion hole in the public finances.
“We’re going to take some pretty tough decisions in addition to the ones we have already embarked upon. Our tax revenues are well down," Mr Cowen added. “The bottom line is we’re spending more than we’re earning. We’re down eight billion on our tax receipts this year. Next year is going to be difficult as well.”
Mr Cowen criticised the widespread negativity which suggests the economic boom was an illusion or never happened. “After ten or 12 good years, when one year was better than the next, for most people, we are now going to face into a few years where the standard of living is going to drop. But it is going to drop back to a level which is still well ahead of where it was five, ten or 15 years ago.”
The Taoiseach also said that the Government was working on alternative plans if up to 2,000 jobs are shed at the computer-maker Dell in Limerick. Dell is due to make a decision in January on the future of its Irish-based manufacturing workers as it rationalises its worldwide operations. It is understood Dell wants to relocate the bulk of its factory-floor activities to eastern Europe and Asia.
“We have put a business case to try to build on what will be part of the Dell operation in Ireland, whatever decisions they come to on the manufacturing side," Mr Cowen said. Last week Tanaiste Mary Coughlan and local TD, Defence Minster Willie O’Dea visited Texas to meet Dell founder Michael Dell, whom the Taoiseach said has shown a huge commitment to Ireland in recent years.
In another interview at lunchtime, Mr Hurley said Ireland was facing “unprecedented” economic challenges, and the decision to recapitalise the country’s three biggest banks was “difficult”..
The Government announced on Sunday night it was recapitalising Anglo Irish with €1.5 billion and struck deals with Bank of Ireland and AIB worth €2 billion each.
“These challenges are very significant”, Mr Hurley said. “This is absolutely unprecedented and poses very significant challenges for the economy.”
The recapitalisation “was a difficult decision, but it was a necessary decision,” Mr Hurley added. “The commitments given by the banks to the Minister for Finance are clear.”