BaileNuachtCartlann Aitheasc agus Preaseisiúintí

Speech by the Taoiseach, Mr. Brian Cowen, T.D., at the European Foundation Forum "Global Recession: Europe's Way Out", Thursday, 5th November, 2009 at 9.30am


Ladies and Gentleman

I want to thank Jorma Karppinen, Director of the European Foundation, for inviting me to address the biennial European Foundation Forum. The theme of this Forum is "Global Recession: Europe's Way Out" and I want to congratulate the Foundation on this solution-focused theme. All of us want to get beyond this recession as quickly and as painlessly as we possibly can. But to do this, we have to be realistic. We have to deal with the situation as it is, not as we might like it to be. This means working to a constructive agenda. It means advancing credible policies which confront the challenges that face the country so we can move forward from this position, rather than advocating policies that fail to address the new reality as it is.

I have always maintained that full and constructive participation in the European Union is critical to Ireland's economic future. Two out of every three jobs in this country depend on exports to the EU. We are a small, open economy and to thrive we must trade internationally. The recent strong Yes vote is a clear and positive signal to other Member States as well as to international business and investment communities that Ireland is intent on continuing to be an influential player, shaping the environment in which we operate and advancing and protecting our interests from the heart of Europe.

I believe long-term economic benefits will flow from the decision of the Irish people to ratify the Lisbon Treaty last month. The choice we have made will allow necessary reforms so that the EU can become more efficient and more effective in dealing with the global problems we all face. Challenges such as climate change, energy, international crime and - of course - the economic difficulties in which we find ourselves now. This is what the Union is all about - States working together to achieve the common good.

Throughout the past eighteen months of the global economic crisis, the EU has time and again demonstrated the importance of co-operation and co-ordinated economic action. It is an irrefutable fact that without being an integral part of the European Union, Ireland would be in much more serious economic difficulty today. We've all seen the severe problems that small countries have had to contend with when facing the global financial crisis on their own.

In the period ahead, Europe faces further significant economic challenges. In the short-term there is the pressing need to restore economic growth and recovery. In the medium to long-term, there is the challenge of competing effectively with emerging economies in Asia and elsewhere, while at the same time grappling with the challenge of an ageing population. The follow-up to the Lisbon Strategy for Growth and Jobs needs to set out the actions we can take both at national and EU level to allow Europe compete successfully on world markets. I look forward to participating in discussions on this in the next few months.
I believe our focus must be on the core policy issues that will help Europe be competitive and we should avoid getting bogged down in too much discussion about processes and structures.

I think it would also be important for the voice of the Social Partners at EU level to contribute to the formulation of a vision for an economically revitalised Union. The outworking of a deeper contribution by the social partners to economic recovery, be it at the national or EU level, should be evident in policies and programmes both legislative and non-legislative, be they in the economic, environmental or social spheres.

Following a long period of very strong economic growth, Ireland now, like many other countries, has to contend with very changed circumstances. The global recession has hit us harder than most.

In a relatively short-time, we have gone from a thriving economy with budget surpluses to a contracting economy with unsustainable budget deficits.

Put simply, we are now spending more than we earn.

Our tax revenues have fallen sharply back to 2003 levels. This means that we will have a deficit in the region of €22 billion in our public finances. To bridge this gap, we are borrowing over €400 million every single week. Clearly, this cannot continue.

Our strategy over the coming years is to bring expenditure back to 2006/07 levels.
As the world economy recovers and demand for our exports increases, there will be more people in jobs and our tax revenues will rise. This combination of cutting expenditure and increasing revenue will restore our deficit to a sustainable level.

But in order for this strategy to work, we must take resolute action to increase Ireland's international competitiveness because this is quite simply essential to generating growth and creating jobs.

Ireland is an open economy and to thrive we have to compete successfully on the world stage for the investment which drives employment. It follows that reducing the cost base of our economy is crucial for job retention and economic recovery. Unfortunately, we have slipped in this area and in order for Ireland to compete and win we must all work smarter, more efficiently and produce more for less.

We have outlined to the EU Commission our plan to restore balance to our public finances by 2013 and they have welcomed it. We are under no illusion that this will be easy, but we are equally sure that it is necessary.

And not only is it necessary, but history has taught us that it is the right thing to do. And what those hard-learned lessons from previous recessions tell us is that we must confront our problems head on, and deal with them squarely and decisively, rather than let them fester and grow. We must not and will not ignore the seriousness of the situation we are in. We will deal with it. We simply cannot afford to longer-finger debt-reduction.
Such a course of action would be counter-productive and simply create a huge burden of debt. That is why it is necessary that we act now.

In this context the Government will, in less than 5 weeks time, place the most significant Budget of our recent economic history before the Dáil. Stabilisation of our deficit by delivering a €4 billion adjustment in 2010 is critical. It is necessary and it is necessary now. And it is not just the Government who are saying this. The need for this adjustment in 2010 has been strongly supported by the ESRI, the OECD, the Central Bank and almost all independent economic commentators.

The window of opportunity to take action to stabilise the deficit is now. Inflation was minus 6.5% for the year to end-September. Prices are falling at the fastest rate in 75 years. This means that the real value of take-home pay and welfare payments has increased by that amount in the last year.

The impact of delaying action and increasing debt servicing costs will mean less for public services in the future.
For example, every extra €1 billion in interest on the national debt would be the equivalent of the annual salaries of 21,500 new teachers or a 6% reduction in general social welfare rates. Postponing action now would result in additional cuts of this nature in the years ahead.

Delaying action will also cause uncertainty regarding the future. And uncertainty can lead to people holding on to their money rather than spending it, and the same uncertainty could cause corporations to reduce their investment in Ireland - investment which is vital to create jobs and get people back to work.

There are many calling for fairness in the Government's response to the crisis - and fairness is at the heart of our response. An essential part of fairness is protecting jobs in the exposed sectors of our economy, and helping those who do lose their jobs.

Three years ago, Ireland could boast full employment. The Live Register figures published this week, show there are now 412,000 of our citizens without full-time jobs. We must do everything we can to stop this trend and reverse it. We will continue to support job-retention schemes and we will continue to invest in up-skilling across the training and further education sectors to enhance people's potential for a speedy return to employment.

But the most important thing we can do to protect jobs and create new ones is to move quickly, decisively and effectively to correct and stabilise our public finances.
This will restore the domestic and international confidence that will attract investment and increase consumer spending which is a prerequisite for employment.

It is both necessary and fair that the balance of the corrective action in Budget 2010 will have to come from the expenditure side as further increases in the tax burden will hamper enterprise and growth prospects. We have made it clear that there is no room for manoeuvre in raising income tax rates next year. Already, the top 4% of earners now pay 48% of income tax.

The Government has indicated that a saving of €1.3 billion would have to be made in the public service pay bill. This adjustment is unavoidable since pay forms such a large part of public expenditure. The pay and pensions bill is almost €20 billion at present or around 35% of current spending.

While this Government is determined to make the necessary decisions, we are equally as determined that the decisions are just and equitable. Sacrifice can be painful. But it feels less painful if it is shared fairly by all citizens. As I have always said, those that have more will be asked to support those who have less. But we will all have to sacrifice something now if we are all to gain in the future.

It is simply a fact that we must learn to do things differently across all sections of society.

In the past year many, many firms have shut their doors. Others will do so in the coming weeks and months. Tens of thousands of people in the private sector have lost their jobs and we are now supporting them as they seek to re-enter the workforce and regain employment.

All around the country, businesses are fighting to survive by adapting radically to the new circumstances in which they find themselves. Pay cuts and freezes are becoming the order of the day. Managers and staff are being asked to find better, more efficient ways of doing things in order to maintain their jobs - and they are responding.

It is now clear the same reform and innovation in the area of public services will also be critical to recovery. The importance of public services is about more than their immediate impact on individual people and businesses. That is why, in my view, the effectiveness and efficiency of our Public Service has always been a matter of strategic national importance. However, in the context of the current crisis, the delivery of Public Service transformation has become much more urgent.

At this particularly crucial time when resources are under strain we need:

A Public Service which represents value for money and is affordable to those whom its serves;

A Public Service which responds to the needs of citizens;

A Public Service which has the resilience to cope with changed circumstances; and

A Public Service which espouses the values of integrity, probity and fairness.

In the coming weeks, there are tough choices facing us all - not least in the Public Service. At this time, it is not enough for our Public Service to change; it must also lead by example. This is what our citizens are entitled to expect. This is not an easy task, and we in Government accept that and recognise the contribution of the Public Service to date. However, if we are to maintain public services to the highest standards possible, the organisations and people that deliver them must change.

The best way to deal with this issue for 2010 and beyond is through dialogue between Government and the Public Service unions. Intensive engagement is taking place at present to explore the options available in light of the scale of the adjustment which is required and which we have already outlined.

Everyone has seen standards of living fall over the past year. I can understand people's anger but protests and industrial disputes won't resolve our economic problems. We are going through a difficult patch but the future does not have to be bleak. If we do what is necessary and what is equitable now, let me assure you, we will recover.

When this is over, I want Ireland to be positioned to take full advantage of the opportunities that will be presented.

We already have one of the best concentrations of high-tech multinationals in Ireland. Our plan is to encourage them to invest further in the high-value research and development areas that provide secure employment and increase exports.

We are already investing billions in research and we need to get a return on it. We will now move this to a new level and create an exemplary research, innovation and commercialisation ecosystem - we will become an Innovation Hub in Europe.

Ireland will only thrive if we play to our strengths. The future economy must be sustainable and it will depend on exports. We need thousands of thriving Irish companies creating high-value products and services that will provide well-paid, quality employment.

This is the core thinking behind the Government's Smart Economy Framework. It is the vision of a green, high tech, high value economy, supported by a pervasive culture of entrepreneurship.
Jobs and growth will come from increased exports of the goods and services we produce at prices our customers can now afford. Unless we regain competitiveness, we can't expect to recover quickly.


Europe is a Union of countries with shared ideals and values. But each is a nation in their own right, with its own culture and its own history. It is this compliment of difference that has always made it a unique Union. And it is to our difference, as well as our common endeavour, that we must look now. To those unique features that make us competitive.

Ireland has a centuries old relationship with mainland Europe and we have always sought positive, friendly and co-operative relations with our European neighbours. And with our neighbours again, we will build a fair and prosperous Ireland and a stronger better Europe.

In conclusion, it is clear that navigating our way through the global recession and emerging successfully as swiftly as possible will require determined, co-ordinated action - at both national and EU level, and across all spheres of our economy and society.

This process of adjustment inevitably involves some difficult and unpalatable choices. Let me be totally clear here, I am applying three simple tests to every measure that we are considering for the forthcoming Budget -

1) Is it necessary?
2) Is it fair?
3) Will it aid national recovery?

The decisions we will implement in the Budget will make Ireland more competitive, more efficient and better placed to reap the rewards of the upturn when it comes.

I would like to take this opportunity to acknowledge the important contribution that the European Foundation continues to make to the planning and design of better living and working conditions in Europe. Of course, we have a special affinity with the Foundation given its location here in Dublin.

I believe the Foundation, through its many research and communications initiatives, will be of valuable assistance to us as we seek to reach a common understanding of the challenges we face as a Union and as individual member states in the period ahead. The Foundation's work can also help us to identify and devise appropriate strategies for economic renewal and growth.

The Irish Government is grateful that so many of you have taken the time to travel from across Europe to join the deliberations here in Dublin over the next two days. I know that officials from my Department and other Government departments are also in attendance and I look forward to hearing from them about the conclusions of your discussions.

I would like to wish you all a productive and enjoyable couple of days.

Thank you.