The rapid deterioration in the national finances revealed in the October Exchequer Returns is a cause for concern, but not panic. A deficit of €439 million is far from unmanageable in the context of the modern Irish economy which produces goods and services worth in the region of €100 billion a year.
It is worth remembering that Ireland has the second lowest debt levels in the European Union and the economy is still growing, albeit not at the sort of pace seen in recent years.
Even the end of year deficit of over €1.5 billion now being predicted by some economists does not mean the economy is on the road to ruin. However the underlying trends in the national finances will, if left unchecked, cause serious difficulties in the years to come. It is now vital that corrective action is taken quickly - at this stage the required measures will be unpleasant, but if action is delayed much longer, even harsher medicine would soon be required.
The question at this juncture is whether the Government will take the required action in the coming Budget, which is set to be the most difficult in almost a decade. If the recent comments of the Minister for Finance are any guide, then the coming Budget will indeed be prudent in the extreme and will move to address the worrying trends.
However in recent years Mr McCreevy's actions on the Exchequer finances have not matched his words. In his Budget speech last December, Mr McCreevy said he would restrict the growth in Government spending to 14.3 per cent this year. As of the end of October, Government spending was running ahead of last year by 19.6 per cent.
The Minister's Budget day prediction on the revenue side looks equally fanciful. Tax revenues were meant to grow by 8.6 per cent, instead they are up only 2.3 per cent.
It is these figures - and not the deficit recorded in October - that are the real cause for concern in the Exchequer statement published yesterday. They are indicative of an administration that cannot control spending or manage revenue; the two basic disciplines required to run the finances of any organisation, from a corner shop to a multinational corporation.
As it faces into the final stages of framing the 2003 budget, the Government should be under no illusion as to the challenge it faces. It has allowed the national finances to deteriorate spectacularly in the course of the last 12 months from a surplus of €2.2 billion to a deficit of €439 million. Now ministers have the chance to stop the rot, but they will not succeed unless they are prepared to make some hard choices.
Failure to face up to these issues now would see the current negative trend in the public finances continue against a very uncertain economic background. Inevitably this would, before long, leave the Government contemplating even harsher cutbacks.