DAIL REPORT: Ireland's economy is in a strong position to withstand the impact of the war in Iraq and current difficulties, the Minister for Finance has insisted.
Rejecting allegations that Government decisions had fuelled inflation, Mr McCreevy told the Opposition not to "talk the Irish economy down".
He said, during Finance Questions, that "confidence is a very fragile thing", but "no matter how one measures growth prospects this year, the Irish economy will do better than that of any of our major trading partners in Europe".
He accepted, however, that "inflation in Ireland is at a level we want to see moderated, because it is twice the EU average". Unless Ireland got inflation down to the 2 per cent EU rate, "we will lose market share, but it is also a factor that in any area which has to catch up, there is higher inflation in some parts of that area".
But "the situation in Ireland is far more robust than in the case of any of our EU trading partners", Mr McCreevy said. If "we temper our expectations, do the sensible things and remain competitive, we will survive this downturn in world economic conditions better than most", he added.
Dismissing the Minister's comments, Labour's finance spokeswoman, Ms Joan Burton, said that Mr McCreevy's statements on the economy at this point "have as much credibility as the bluster from the gentleman in the bunker in Baghdad, the Minister Mohammed Saeed al-Sahaf".
And Fine Gael's finance spokesman, Mr Richard Bruton, asked why the taxpayer was "always the fall guy" for all the over-runs, citing the revised cost of the national Development Plan from €26 billion to €40 billion.
Ms Burton said that "the Government is driving that rate of inflation. Despite the risks of the war to the economy, the Government appears to be taking no action".
Most "of our inflation is Government-driven by the various taxes and price hikes the administration has imposed since it was returned to office. Those hikes are contrary to the promises the Government made to the electorate," Ms Burton added.
It was a "matter of statistical fact that most of the underlying causes of Irish inflation cannot be put down to the Government and its tax increases", Mr McCreevy replied. The effects of indirect tax increases from the Budget added 0.85 per cent to the consumer price index, he said.
Mr Bruton said that an increase of 54 per cent in the NDP over 24 months "cannot be explained away by inflation in the sector, which was less than 10 per cent in that period".
But the Minister said inflation was 30 per cent between 2000 and 2002. In some urban areas the Government had had to pay €600,000 per acre for land and €30,000 in rural areas, when agricultural land was €6,000 to €8,000 an acre.
Ms Burton said that everyday indicators showed "loss of jobs, serious loss of confidence among investors, loss of investments, loss of exports and loss of markets". The "true test of policy is when external conditions cease to be favourable and he is failing the test spectacularly".
The Minister insisted that the prospective outlook for the world economy was factored into his Budget day forecasts for the Irish economy. "I specifically referred to the difficulties in the Middle East as one of the more obvious significant downside risks to those economic projects."
Current estimated costs for implementing the National Development Programme will be about €40 billion, compared to an original estimate of €26 billion, and the Minister said new mandatory guidelines would be issued later this year prior to the agreement of a new five-year multi-annual framework for capital investment.