THE IMPACT of the loss of economic sovereignty on political decision-making is only now being borne in on the Government. Having campaigned on the basis of renegotiating the terms of the EU-IMF bailout and securing a cut in interest rates, Ministers found themselves with very limited room for manoeuvre. At home, as the extent of the financial disaster surrounding the banking collapse became clearer, promises on job creation, taxation and structural reform began to take on aspirational qualities.
Offering to be judged on their performances within 100 days may have seemed a good idea to Enda Kenny and Eamon Gilmore when in opposition. But it has put a time-limit on the “political honeymoon” accorded to all new governments and kick-started a process of critical evaluation. Blaming the previous government for unpopular measures is losing its potency. The new Coalition Ministers are the decision-makers now. They must move out of opposition mode. The new Government will be assessed on its ability to create employment; improve competitiveness; reduce the bailout burden on taxpayers and protect living standards. It has not established confidence that it has the capacity to address the big, as distinct from the popular, issues head on.
For all of that, 100 days in government can only provide a snapshot of potential. The Government has displayed an appetite for reform and job creation that was lacking in its predecessor. And while its ambition outran its capacity in securing change to the terms of the EU-IMF bailout, it has now embarked on a high-risk fiscal strategy that may alienate the European Central Bank. Michael Noonan’s plan to burn senior bondholders in mothballed financial institutions, discussed only with the IMF and announced in the United States, has added to uncertainty within the euro zone.
Written off in opposition, Mr Kenny has been the star of the new Government. The easy and confident manner in which he handled the visits of both Queen Elizabeth and President Obama provided a boost to public morale. His conduct of Dáil business under pressure was assured. Cuts in ministerial pay and conditions were well received. But poorly planned ministerial announcements in relation to water charges, the household charge and wage-setting mechanisms generated unnecessary friction between the Government parties. There are indications that commitments in relation to third level fees and income tax increases are being reviewed.
The jobs initiative fell short of what had been promised and involved a levy on private pension funds. Any further investment – also requiring EU-IMF agreement – may absorb the remainder of the National Pension Reserve Fund. A fall in the unemployment rate has coincided with rising emigration. While export figures have reflected solid growth, the domestic economy has continued to haemorrhage jobs. A review of Government spending is due in the autumn and further cuts in services are likely. The Coalition has yet to establish confidence that it has the capacity to make the hard decisions that will turn this country around.