Mixed political reaction follows IMF report

There was a mixed political reaction yesterday to the International Monetary Fund (IMF) report on the Irish economy, with the Government claiming it as an endorsement of its policies and Fine Gael citing the report as another warning about the dangers of a reckless budget.

The Tánaiste, Mary Harney, described the report as a positive assessment of the economy's performance and prospects.

She said the IMF had acknowledged the continued impressive performance of Ireland's economy, which it said was characterised by high real gross national product (GNP) growth, low unemployment levels and an inflation rate that is moving towards the EU average.

Responding to the IMF forecast of a GNP growth of 6.2 per cent in 2006, the Tánaiste emphasised that this growth rate projection was very high by international standards and was far more favourable than those of our fellow EU members-states.

Ms Harney particularly welcomed the acknowledgement that Ireland's "robust performance has been supported by sound economic policies, including prudent fiscal policy, low taxes on labour and business income, and labour market flexibility".

She said this underscored the Government's intention to pursue these successful policies. "The Government is committed to provide the stable fiscal environment in which the country will continue to prosper," she said.

Ms Harney also pointed to the fact that the IMF had highlighted the safeguarding of competitiveness as a key priority of economic policy and social partnership. She also recommended that wages should not rise above productivity and inflation growth.

"The IMF pointed out that the key challenge for Ireland will be to overcome our over-reliance on the building sector, but it acknowledges that the continued high level of Government investment in public capital programmes is appropriate now," she said.

On the housing market, Ms Harney maintained the "recent preliminary census figures for population growth would tend to support the view that the demand for housing is in line with our young population, income and employment growth, and that the consensus scenario for the housing market is a soft landing."

However, Fine Gael finance spokesman Richard Bruton said the report confirmed the warnings by the party and the Economic and Social Research Institute regarding the Irish economy.

"It is an economy that has been growing strongly for the past 10 to 12 years but now faces fragility in terms of rising costs and falling competitiveness and an over-dependence on one or two sectors.

"Rather than being part of the solution, the Government in the past number of years has been part of the problem," said Mr Bruton.

"The last thing the economy needs now is another reckless budget before an election designed to secure the political future of the Government rather than the future security of the economy," he said.