IMF

Brian Cowen would have you believe that the Government was pursuing perfectly sustainable policies until an international tsunami washed onto our shores. The IMF has buried that pretence. It estimates that 93% of the hole in our public finances is due to bad domestic policy, not troubles imported from an international recession. This is the highest estimate yet.

The real twist of the knife, as far as Brian Cowen is concerned, was their demonstration of the really toxic nature of the 2008 Budget. All on its own, that Budget dug 1/3 of the hole in the public finances. It was introduced after the election was won and demonstrates not only economic folly, but political ineptitude too. Charlie McCreevy was just as guilty of pumping up the spending ahead of the 2002 general election, but at least he had the wit to slam on the brakes when the election was over.

The accusation that the IMF are being wise after the event is not sustainable because it was among those issuing warnings that our housing bubble could only end in tears. It was among the nay-sayers whom the former Taoiseach wanted to put on suicide watch.

Faced with what to do about the banking crisis, there are those who don’t know and there are those who don’t know that they don’t know.

Those who don’t know, seek advice, and the IMF has plenty of advice to offer.

Those who don’t know they don’t know, just plough ahead, offering no forensic analysis of their proposals, brooking no debate, but pushing ahead with the faith of a believer.

Our Government falls into the second category. No country has ever asked its taxpayers to buy toxic bank loans on this scale. They see criticism as sabotage. Alternatives as contemptible. When I hear Ministers distorting the views of others as a means of defending their own, I get particularly worried. The stakes are too high with NAMA to make it a test of the zeal of faith.

Learning the Lessons of History

Last week I was asked to respond to a paper on the Whitaker/Lemass legacy for tackling today’s challenges. The parallels are unmistakable. Then as now, policy errors had plunged Ireland into a deep crisis. What was was needed:

• The honesty to cast aside failed policies
• The willingness to challenge a narrow economic orthodoxy
• The ambition to realise the full potential of our people on the foundations of strong productivity growth and competitiveness.
• The impatience to make decisions and drive their implementation

Ireland will emerge from this crisis, however, there is a world of a difference between the Ireland that will emerge if we confront the challenges and the Ireland which will emerge the strong enough sit tight and protect their positions and allow the forces of an unforgiving international market to grind out a sustainable profile for the Irish economy and the social policies which it can support.

The question for us today is – are we willing to fix our broken system of governance? Will we challenge low performance? Will we continue to tiptoe around powerful interests who obstruct change? We need to embrace the concept of a smart state.

The State must regain its dynamic force – to reinvent the economy, to reform the public sector, to renew politics.