Ahern sees 'hard year' ahead due to downturn in US economy

TAOISEACH BERTIE Ahern has warned of a "hard year" ahead for the Irish economy in his most downbeat assessment to date of the…

TAOISEACH BERTIE Ahern has warned of a "hard year" ahead for the Irish economy in his most downbeat assessment to date of the repercussions of the sharp economic downturn in the US.

Mr Ahern said a huge range of companies in the US were facing serious problems, a situation that would have an inevitable knock-on effect on the world economy.

In a specific reference to the effects on Ireland on what many commentators say is a looming recession in the US, the Taoiseach said: "We won't escape that. What we have to try to do is keep up the growth rates.

"Employment is still being generated. It's going to be a hard year, and we need to keep working hard at it."

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The comments by the Taoiseach, who was speaking to reporters in Dublin, were part of a response to a question about the live register figures for February, published by the Central Statistics Office (CSO) on Friday.

The figures show that unemployment had increased to 5.2 per cent, the highest level for eight years.

In a wide-ranging reply, Mr Ahern expanded his comments to include what amounted to a sober assessment of the growing difficulties facing the US economy and markets.

He also suggested that the subprime crisis in the US was not a temporary phenomenon but reflected more fundamental and long-term difficulties.

Saying he had been observing the international economic situation closely, Mr Ahern pointed to major US companies, including reinsurance companies, that are facing serious difficulties.

"It seems to me - and from talking to people generally - that those that were saying that the subprime rate would wash out of the system by last Christmas have been a long way off the mark."

He said the Government's response would be to continue generating employment and encouraging new companies to invest in Ireland. There was also an onus to stimulate confidence in every industry, he said, adding that 2008 would be a hard year.

In an equally muted assessment of the domestic residential housing market, Mr Ahern said the Government's view had always been that this would have a knock-on effect on the economy, and it was not something that would lead to a quick "bounce back".

"Every 10,000 houses less that are built knocks 1 per cent off growth and that takes a fair bit out [of the employment figures]. That's the rule of thumb. It also takes a considerable amount of revenue out as well. We are not going to see bounce-back in that in the short term."

It came as Labour leader Eamon Gilmore demanded urgent Government action for what he described as a crisis in the construction sector.

In his first response to the CSO report, Mr Gilmore said the figures on construction employment made grim reading.

"They confirm the pattern seen in previous months and fit with economic forecasts that have been predicting a major decline in construction employment as a result of falling numbers of houses being built.These job losses are also reflected in the rising live register figures, which increased by 8,500 in February."

Mr Gilmore said there was scope for some of the laid-off workers to find work in other construction activities. Access to training was now the crucial issue.

"What is required is a major programme of training and upskilling for these workers. If we are to avoid people slipping into long-term unemployment then we must act now to address their skills and training needs."

Mr Gilmore also claimed that the Government was complacent about the implications of the latest figures.

"Last week in the Dáil the Taoiseach sought to give the impression that the Government were on top of this issue. There is no sign, however, that they appreciate the scale and urgency of the challenge."

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times