TAOISEACH BRIAN Cowen is an intelligent politician. Let us hope he is also lucky. For a number of key decisions during the coming months could, depending on variable international and domestic circumstances, turn out to be right or disastrously wrong.
With the economy in recession and the Lisbon Treaty receiving intensive care, determined leadership is required to steady nerves and chart a way forward. Is Mr Cowen up for it? Ever since he crumpled in the face of Irish Farmers Association intransigence on Lisbon and agreed to veto world trade concessions, there have been whispers of indecision.
Now, a forecast of recession by the Economic and Social Research Institute (ESRI) has stripped away the possibility of prevarication. He will have to address a range of his predecessor's misguided fiscal concessions if competitiveness is to return to the economy. The public service reforms he himself promised some months ago are urgently required. And a statement of intent on the Programme for National Development, with spending revised in light of the new circumstances, should be published. There is nothing to be gained by attempting to ignore the economic bogeyman.
In the past, ministers agreed to harsh cutbacks and then disappeared to the country, allowing details to leak out during the summer holidays. That should not happen now. We are in economic trouble. But it is nothing like the dire difficulty the State experienced in the 1980s. The recession can be contained, both in terms of time and severity, provided the appropriate action is taken. That will require leadership and clear explanations of what is being done and why it is necessary.
Minister for Finance Brian Lenihan has offered hope of early remedial action, suggesting Cabinet decisions will be taken on the basis of next Wednesday's half-yearly tax receipts. Those initial changes are likely to focus on current Government spending projects. Longer-term measures, perhaps involving taxation, will be dealt with in the budget. Mr Lenihan has promised resolute, prudent and determined action on behalf of the Government. But, given that Fianna Fáil-led governments allowed inflation rates to top the EU average for the past eight years and erode competitiveness, that commitment might require a pinch of salt.
Conflicting pressures are besetting Mr Cowen. The introduction of severe cutbacks at this juncture could not only jeopardise Fianna Fáil's prospects in next year's European and local elections; they might make it impossible to win a new referendum on the Lisbon Treaty. And there is still no certainty Mr Cowen is prepared to risk revisiting that project because of voter resistance. The other issue requiring judgment is whether, as suggested by the ESRI, the overall budget deficit should be allowed to exceed its 3 per cent limit next year. Increasing Government debt in order to soften the severity of cutbacks and prepare for recovery could be justified if the recession was short-lived, but if it dragged on, the policy might become a recipe for disaster. Mr Cowen will require perspicacity and luck.