The reality of the situation is that Ireland’s public finances were in such poor state this autumn that the lender of last resort, the IMF, had to join forces with the European Union to help ensure Ireland has the resources in place to finance itself.
During his budget speech, Minister for Finance Brian Lenihan said, “This has been a traumatic and worrying time for the citizens of our country. They are concerned that we had to seek external support to help us with our economic and financial difficulties. They are worried about the impact of this momentous and difficult decision on their lives.”
The cuts to public spending that were announced in the budget were wide ranging. One key area affected is a determined effort to draw more lower-paid workers into the tax net. A second area, that is expected to cause the most pain, is the inevitable cut in the enormous social welfare bill that would include the unemployed and mean cuts to family benefits, among others.
“Yet, in fact, even in this most intractable and complex crisis, there are clear signs of hope,” Lenihan said.
The financial crisis in Ireland occurred not because there were problems with the economy as a whole, but instead because of fundamental problems with Irish banks and because of an inflated property market.
Lenihan said that financial activity in the country had now stabilized. He said, “As anticipated, this recovery is being led by exports. Our exports increased by nearly 7 percent in real terms in the first half of this year. Output in the manufacturing sector was up 12 percent in the third quarter, while surveys point to continued strong growth in export orders for both goods and services.”
Although Lenihan had some reason for optimism, the fact remained that his budget cut 6 billion euros (almost US$8 billion) from the Irish economy. It remains to be seen whether the Irish economy can handle such deep cuts—and whether the public will accept them.
The Green Party Finance spokesperson, Sen. Dan Boyle, said that his party had sought to protect funding in education, to reduce the cost of the political system, protect funding in support for the homeless, and protect funding in the area of mental health, among others.
Sen. Boyle said, “In all these areas we have either ensured no cut at all occurred, or, that cuts were less than those imposed elsewhere. In education we protected the pupil-teacher ratio, kept capitation reductions low, and ensured that a return to third level tuition fees did not happen.”
“We have also argued publicly and privately that important signals of example must be given to people who are themselves facing tough times. The costs of our political system needed to be reduced, and today’s measures are an important step,” he said.
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