Economist, Colm McCarthy today warned that proposals to cut the public sector pay bill by giving public servants 12 days unpaid leave was a temporary measure that would not address the structural deficit facing the country.
And Mr McCarthy stressed that up to four tough budgets may be required before the state's finances are put on a sustainable footing as, even with savings of €4 billion this year, the deficit next year will remain around the same such is the seriousness of the situation.
Mr McCarthy said that the Government has to deal with the current financial deficit by permanent measures rather than temporary year long measures such as giving public servants 12 days unpaid leave as the trade unions had proposed
"There's no point coming up with schemes that will apply a band-aid to dress up the budget figures for 2010 only if those measures automatically reverse themselves at the end of 2010," he warned.
"We have a deficit that looks like it is going to 12 per cent of national output this year and next. It is mostly of a permanent nature - it's a structural deficit in the jargon and it won't automatically eliminate itself through improvements in tax revenue as the economy recovers.
"We need permanent measures to deal with it.It could be permanent tax increases or permanent expenditure reductions so any measure that's of the nature of a temporary surcharge on taxes or a temporary deal to cut some element of expenditure does not address the issues."
Mr McCarthy, who was speaking in Cork prior to a pre-budget presentation to some local business people, said that he would suspend judgement on the government-union talks until the precise details of any agreement are published.
But he refrained from criticising the trade union movement over their proposals in the talks. "Trade unions exist in order to defend the terms and conditions and pay of their members - you can't fault them for doing what they are there to do," he said.
Mr McCarthy who authored the Bord Snip report for the government, said that it looked as though it would be well into 2010 before the Irish economy shows any signs of a recovery from what has been the most serious downturn since the early years of World War II.
"At this stage we are into the early days of December 2009 - the downturn is nearly two years old now. At this stage there are no concrete signs that recovery has actually commenced. The tax revenue figures have just been released for November and they are still very weak."
"It looks as if the numbers of people signing on the Live Register have finally stabilised but that is partly because participation in the labour force has weakened and because emigration has resumed.
"It is hard to look around the Irish economy right now and say there is firm concrete evidence of recovery yet. But it should come in the year 2010 at some stage - at least it looks as if things have stopped getting worse."
Mr McCarthy pointed out that the Iriish economy had contracted by around one-seventh which was meant that the country was experiencing a much deeper recesssion that many other European countries which have started to show signs of recovery.
"The recession here is deeper than in most other European countries, the public finances are in serious imbalance, the banking system has collapsed. This is the worst downturn since the early years of the Second World War," he said.
"What Government needs to do, and I think this is the best way of giving people hope for the future, is acknowledge the problems which they've done and deal with them decisively and as quickly as possible."
"In the short run, if you increase taxes and reduce spending that has a deflationary impact. In the long-run, decisive action is a stimulus package as we found in the late 1980s and dithering around and deferring the necessary policy adjustments doesn't make things better," he said.
