Economy may shrink by 6.5%, warns Taoiseach

THE ECONOMY could contract by up to 6.5 per cent, Taoiseach Brian Cowen told the Dáil.

He said the economic deterioration in the final quarter of last year and the beginning of this year, was a moving target in terms of the problems of predicting the ultimate outcome.

“It was said at budget time it would be in the region of 2 per cent; it was said in January that it would be approximately 4 per cent; and the indications are now that it could be 6 per cent or 6.5 per cent.” This, he said, showed the fragility of the economy and the need for the Government to decide the balance and correct approach leading up to the budget.

Mr Cowen announced that the budget would be brought before the Dáil on Tuesday, April 7th. He suggested that the House return a week earlier from its traditional Easter break to resume the budget debate.

Fine Gael leader Enda Kenny asked if the Taoiseach was prepared to make available to Opposition spokesmen for finance the options and information being presented to the Cabinet by the Department of Finance relating to spending options and raising revenue to deal with the economic crisis.

“If we are to make any constructive suggestions or proposals in the national interest to deal with this financial crisis, then at least we should be made aware of what is on the table.’’ Mr Cowen said this would be a matter for the finance spokesmen and Minister for Finance Brian Lenihan.

“I must say, and Deputy Kenny is aware of this, that budgetary matters are confidential. They are within the Government remit in terms of the budget itself.

“We would welcome any possibility for debate or discussion in the House between now and then in a structured way that would assist the Opposition if it so wishes to contribute to an integrated package of measures that will be necessary.” Mr Cowen suggested that the best way to proceed was to have a pre-budget debate which would enable the Minister for Finance to come into the House and explain the range of possibilities available.

“The one thing we can all say is that the decisions that must be taken will be difficult. There are no easy options here. In fact, we have seen a deterioration taking place as the year has progressed, which has mirrored what is happening in the international economy.”

Labour leader Eamon Gilmore said the Taoiseach and the Minister for Finance had invited the Opposition parties to engage with the budgetary process and put forward proposals. While Labour was very willing to do that, there was a certain amount of basic information required, he added.

He said he supported Mr Kenny’s request for information.

Mr Cowen estimated that the financial “discrepancy” was between €4 billion and €4.5 billion. This related to the Department of Finance’s estimate at the end of February of the deficit on the tax side and what was emerging on the expenditure side.”

Mr Gilmore asked if the Taoiseach would make available information to the Opposition on the impact such “a hit” on the public finances would have on the wider economy.

Mr Cowen said Mr Lenihan would engage with Mr Gilmore and would inform the House of the position.