Public must be told survival is at stake

INSIDE POLITICS:The Coalition has spread the delusion there is a relative painless way out of our current woes

THE GOVERNMENT will be a month in office today. While it has displayed a welcome air of confidence in the early days, the Coalition’s ability to deal with the crisis in the public finances is the test that really matters. If it fails, the outlook for the country and its people is grim.

The focus on the banks and the attempt to “renegotiate” the EU-IMF bailout has preoccupied the Government for the past month and obscured its own plans for the economy. Those plans should become clearer with the so-called Jobs Budget, which is due to be unveiled before the summer.

The Programme for Government did not inspire confidence that Fine Gael and Labour actually grasped the scale of the problem facing them when they took office, but the past month’s induction course into the reality of power will, hopefully, have changed all that.

The problem with the programme was that the key chapter on the economy, under the heading “Banking and Renegotiation of the IMF-EU Programme of Support”, was full of new spending commitments rather than the required spending cuts.

Apart from the delusion that a serious renegotiation of the EU-IMF programme was possible, the economic policy was full of feel-good job-creation measures but failed to spell out the punishing tax increases and spending cuts so urgently needed.

The Coalition’s initial complacency has fuelled the widespread public delusion that there is some relatively painless way out of our current woes.

The reality is that we have got to implement the EU-IMF programme as any alternative will be far worse.

The Government needs to make the electorate understand that national survival is now at stake but it has not helped its case by being so slow to understand the point itself.

Blaming the EU and the IMF for the problems we created ourselves and holding out the promise of a renegotiation that could make our banking problems disappear was a big mistake.

It has also fuelled a revival in the culture of national victimhood. That attitude helped to keep Ireland poor for the first four decades of our independence and its return threatens to bring us right back to where we started, with the EU replacing the UK as the big bad ogre.

Hand in hand with the notion of victimhood goes the glib assertion that we can “burn the bondholders” as a simple solution to our banking and fiscal woes.

Former taoiseach Garret FitzGerald rightly warned in this paper last weekend about the damage the “celebrity economists” were capable of doing to our fragile international reputation and undermining the ability of the banks to recover.

Economist Colm McCarthy, who has a proven track record of public service in advising governments about what needs to be done, bluntly warned in last week’s Sunday Independent that “there is no shortage of wishful thinkers offering a snake oil solution, including unilateral default or leaving the euro”.

Ultimately those things might be forced on us, but far from making things better for ordinary people they will inevitably make them a whole lot worse and would plunge the country into a serious long-term decline.

One of the brightest newly elected TDs, Paschal Donohoe of Fine Gael, has penned an interesting paper on bank default which provides a welcome contrast to populist rabble rousing in the Dáil from new TDs on the far right and the far left. Donohoe’s basic point is that a sovereign default would impose immediate cuts in public spending that would be five times greater than all the budget “adjustments” since 2008 taken together.

The only coherent alternative to the doomsday scenario is a determined effort to get the exchequer finances under control. This will require sacrifices all round, but the Government will have to start with the most privileged in society for a change.

Before ordinary public servants are asked to take any more pay cuts, all those paid more than €100,000 a year out of the public purse, including hospital consultants, judges, administrators and academics, should be subjected to serious cuts in their pay along the lines already imposed by the politicians on themselves.

The overall amount of money would not be significant but the symbolism would be critical.

One of the reasons the last government failed to bring the public with it was that it didn’t understand the need for symbolic acts like the need to sack bank directors and senior bank executives from the moment the State pumped in the money to keep them afloat. It also took too long to implement the serious cuts in politicians’ pay, which should have come about before anybody else was hit.

As the Portuguese bailout shows, we don’t have a lot of time left to get things right. The Coalition will have to show in its pre-summer Jobs Budget that it is prepared to make the concrete measures required to get the public finances in order by 2015.

That might not even be enough to save us, but without resolute action there is no hope.