As we celebrate or perhaps mark the second anniversary of the current Government coming into power, a lot seems to have happened since the Coalition assumed office with such a strong working majority.
Many difficult and unpopular decisions have been taken, including perhaps the most contentious of all, the residential property tax which is due on Jul 1.
Not surprisingly, the popularity of the Government has taken a serious battering. It would be very strange indeed if a government forced to take so many difficult decisions was able to maintain its popularity. It should never be forgotten that the Government, coming into power two years ago, inherited the biggest economic and financial mess that any government in the history of the State has ever been forced to inherit. In this context, it is a bit rich and more than a bit galling to hear the self-righteous indignation of many Fianna Fáil politicians on a whole range of issues. One hopes that the electorate might have a better memory when it comes to the crunch.
While the Government has been forced to take many unpopular decisions, on the positive side there are a number of notable achievements. Top of the pile is the fact the economy has undoubtedly stabilised over the past couple of years. Granted, the stabilisation has been driven by the external side of the economy. Domestic demand, as in consumer spending and business investment spending, has remained very weak, although there is increasing evidence that the situation is stabilising. A second major achievement is the fact the labour market has stabilised, and indeed last week we saw that employment rose by 1,200 in the year to the end of December, which was the first annual growth in employment since 2008. When the Government came into power in Mar 2011, 441,200 people were signing on the live register. In February this year, 428,900 were signing on. The unemployment rate fell from 14.4% of the labour force to 14.1% over the same period.
Some of this improvement is undoubtedly due to emigration, but there is clear evidence that the aggressive job shedding has ceased and we are now seeing some job creation. The third major achievement over the past two years is that the international reputation of the country has been seriously repaired. This has paid dividends in terms of the ability to sell Irish government debt in a limited way at viable rates of interest, some investment in the banks, the ability to attract foreign investment and the generally favourable commentary that Ireland is now getting.
The deal recently reached on the promissory notes is also a positive, and it is good to see that another tranche of Irish debt looks likely to be restructured over the coming months. The EFSM and the EFSF are the two funding mechanisms that are the subject of this week’s negotiations. They loaned just over €40bn to Ireland as part of the troika deal. There will not be any write- down of this debt, but it is probable that the maturity profile will be pushed out considerably and the interest rate charged could be reduced. A lower interest rate would obviously reduce the annual cost of servicing, but a longer maturity profile would obviate the need for the NTMA to refinance the maturing debt. And of course by pushing it out over many years, inflation will erode the real value of it in today’s money terms. This would provide considerable relief.
All in all, one should not be too harsh on what the Government has managed to achieve in very difficult circumstances. I would not agree with everything that has been done and indeed I am critical of much that has not been done, but for a government trying to re-launch a shipwreck, pleasing all of the people all of the time is never going to be possible.
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