THE STATE will run out of money next July if the budget, which is backed by European commissioner Olli Rehn, is not passed by the Dáil, Taoiseach Brian Cowen has warned.
He was responding in the Dáil to Labour Party leader Eamon Gilmore who said the planned €6 billion adjustment in the budget would hamper growth and job creation.
“If this country and this parliament fails to make the necessary adjustments, then we put at risk the funding of the State after July of next year and what will happen then is that we will be faced with a situation where we will only be able to spend €31 billion,” said Mr Cowen.
The State could not go on spending €50 billion a year when it was only taking in €31 billion. “Being only able to spend €31 billion would involve a serious adjustment in the level of services that could be provided. No responsible government, therefore, could contemplate that approach,” he said.
The Taoiseach’s comments came on the last day of the visit to Dublin by European commissioner for economic and monetary affairs Olli Rehn.
Fine Gael finance spokesman Michael Noonan and Labour Party finance spokeswoman Joan Burton differed on budgetary strategy for next year. Mr Noonan accepted the €6 billion adjustment figure while Ms Burton rejected it.
“I agree with [Mr] Rehn on the need to use conservative growth projections in order to formulate a credible four-year plan. That is why Fine Gael has agreed that €6 billion should be a working target for the scale of the adjustment next year,” said Mr Noonan.
He told Mr Rehn that a new government with a clear electoral mandate and a stable majority would offer far greater stability and certainty to the financial markets.
Ms Burton said she had told the commissioner her party’s view that the €6 billion adjustment planned for the budget was too much.
She said she had got the impression that the four-year target of €15 billion was a negotiated target and not an exact figure.
Sinn Féin Dáil leader Caoimhghín Ó Caoláin said he told Mr Rehn that excessive austerity measures would “kill confidence” in the economy.
The Green Party welcomed Mr Rehn’s endorsement of attempts to find a consensus among the political parties. In a speech yesterday afternoon Mr Rehn said the private sector and the EU shared in the responsibility for the financial crisis. “In the case of Ireland in particular, we need to recall that sovereign debt has not been at the origin of the crisis. Rather, private debt has become public debt. The financial sector has misallocated resources in the economy and then stopped working. It needs reform,” said Mr Rehn.
“Indeed, earlier and better surveillance of these imbalances right across the EU could have helped to avoid the worst excesses,” he told the Institute of International and European Affairs.
Department of Finance officials are finalising the draft document for the four-year fiscal plan. A Government source said yesterday that the document, when published, would be “highly detailed and specific”.
It is now generally accepted that the document will be released during the last week of the month.
The source said the Government has no illusions that the publication of the document will result in any sudden improvement on the bond spread for Irish debt, currently over 8 per cent. The first tangible reaction of the markets to the four-year plan is expected to be seen in January.