The State needs policy measures to “reflate” the economy through a carefully managed programme of public investment, including in education and public transport, Labour Party deputy leader Joan Burton said.
She said a stimulus package to promote a green, “energy technology” economy would also help to create jobs by employing people currently suffering from the slump in the construction sector.
Addressing the party’s conference in Kilkenny today, Ms Burton said the Government’s current policies threaten to turn "recession into depression”.
Ms Burton, who is also Labour’s finance spokeswoman , said the economy and the Government were both “in a state of paralysis”.
The banks were “on life support” and the State was witnessing job losses on a scale “not seen for decades”.
She said tax revenues were collapsing as economic activity slows down.
Ms Burton said the Government was “out of touch, out of ideas, with out of date policies” and that Ministers had “lost the energy for reform”.
Criticising the current proposals to recapitalise the banks, Ms Burton said: “Governments everywhere are injecting equity into their banks. Brian Lenihan’s ‘Farmleigh Formula’ is to invite private equity funds such as the Carlyle Group and JC Flowers to rescue the Irish banks. This is like being rescued from a whale by a shark.”
Ms Burton said both the National Treasury Management Agency (NTMA) and the Pension Reserve Fund could be the vehicle for state equity investment in Irish banks.
On jobs, she said there must be a package of measures to get the depressed economy moving.
“A stimulus package is necessary for one simple reason. When demand slumps, when deflation is a greater menace than inflation, when consumer and corporate confidence has collapsed, fiscal conservatism makes little sense.
“Instead, it makes sense to reflate through a carefully managed programme of public investment. It’s smart economics to invest in education and infrastructure like public transport.”
Ms Burton said this was also now the time to lay the foundations for a “low-carbon economy”.
“For years we had IT, information technology, as the engine of growth. Now is the turn of ET, energy technology.”
She said Germany had created 25,000 jobs by retrofitting some 200,000 apartments in a two-year period and that Britain was now creating 10,000 jobs through a similar programme.
"Ireland can do the same.”
“Why abandon construction workers when the opportunity is there to use their skills to deliver environmental benefits at quite a modest cost? Directed wisely, this economic stimulus could be the basis for a 'green new deal' for Ireland, creating jobs, leading to long-term prosperity, while helping us play our part in solving the climate crisis,” Ms Burton said.
She told delegates the “gloves are off” and that an “epic battle” of political ideas had begun.
“The doctrine of market fundamentalism has been so dominant, so pervasive over the past three decades that it has seemed like a law of nature. People are reaching out for a new politics.”
“[Taoiseach] Brian Cowen still doesn’t get it. He holds steadfastly to the failed dogma of the invisible hand: that markets can do no wrong.”
She accused Mr Cowen of facilitating “budget after budget” multi-billion euro tax cuts for the rich, who were “more likely to stuff their loot in offshore havens than invest it productively”.
“Having spent his career as the champion of policies that resulted in the meltdown, Brian Cowen now promotes policies that will turn recession to depression.”
She said the common good was “superior to vested interests” and sectional interests and that if there were sacrifices to be made, the burden had to be shared in a “fair, transparent way”.
“Burden sharing may take many forms through extra taxes, wage restraint or the deferral of worthy policies,” she said.
“Fairness has to be transparent. No one group either in the public or private sectors can carry all the sacrifices and each will rightly want to see how those who have done so well in the past decade are willing to take their share in the pain of recovery.”
Ms Burton told delegates Labour offered “pragmatic ideas” to bring progress, but also a long-term commitment to an economic policy that valued trust and traditional ethical standards as “essential elements of the financial system and balances the profit motive with responsibility to the community as a whole”.
Minister for Finance Brian Lenihan said the Government was working hard to ensure the banks are lending to business. They will shortly inform the Minister of the credit initiatives they have put in place.
“The Government has one of the largest fiscal stimulus plans in the EU already in place. We will be borrowing 6.5 per cent of GDP to fund significant capital investment that will yield short and long-run growth returns,” he said.
“The Labour Party should be careful that its rhetoric against private investment does not scare away the many foreign companies that have invested in Ireland creating hundreds of thousands of jobs. This government will always welcome private investment in Ireland that supports jobs.”
Labour delegates will discuss a number of motions proposed by the national executive committee on the economy and the banking sector.
Party leader Eamon Gilmore will address delegates at the Kilkenny conference at 8.30pm this evening.
Additional reporting: PA