IT’S hard to be positive in the current climate, but the G20 summit in London on Thursday sent out a signal that nations, not bankers, will dictate our destiny in the future.
That was a good day’s work, and no less a global financier than George Soros expressed the hope that the fairly unified stance by Germany and France on the one hand, with the US and Britain on the other, who wanted more money pumped directly into economies, was a big help.
Gordon Brown got a standing ovation from his peers at the end of the eight-hour day some feared would end in acrimony and with little to show for the leaders’ efforts.
On the basis of reports from the event it is fair to say there was a genuine sense that differences were buried as the world leaders united to tackle the current crisis.
It does not mean that miracles have been worked, but the clear message was that the issues that need to be tackled, including tougher regulations of financial markets, particularly hedge funds, will be addressed.
French President Nicolas Sarkozy got his wish as the need for a new regulatory environment for the global financial sector and of dodgy tax havens were taken seriously.
Pledges of a $1 trillion (€820bn) package to aid poorer countries, including Eastern European states, were agreed.
Many had hoped the world’s leaders would have put economic regeneration at the centre of the talks.
Nevertheless, the consensus in the end was that the range of measures agreed sent a strong enough signal to the world that the most powerful players in today’s economy were at one when it came to tackling the current crisis.
Markets reacted positively and the hope is the global economy, set to fall 3% this year, will show the first shoots of recovery in 2010.
It would be great if the same could be said for the Irish economy, but regrettably that is not the case.
Even the latest analysis from the Irish Central Bank has further downgraded the outlook for this year and next, concluding that two tough years of recession are ahead, with unemployment set to rise to 15% next year.
We know about the deficits and the fall in the tax take. It is also clear the construction sector, which up until now accounted for nearly 25% of the economy, is rapidly vanishing.
According to the Central Bank, the number of houses likely to built next year will be just 12,000 against 90,000 in 2006, when the housing boom peaked.
But the bank says it’s time the Government set out a framework to get us out of the mess and spell out what it intends to do to restore confidence to the economy.
That point was also made on Thursday by top Irish stockbrokers who said we have to make clear to the outside world we have a plan.
In effect they said the Government has to put in place a clear strategy outlining how it intends to deal with the deficit and its plans to rescue the banking sector. This can be done over a number of years, but what the rating agencies and others who monitor our progress want to see is a clear articulation of that strategy.
Joe Carr, managing partner of the accountancy group Mazars, said our focus has been too narrow.
Everyone is concerned about the national finances and the fall in the tax take.
Those are key issues, but they relate to a bigger structural question — which is how Ireland plans to grow again without the stimulus of a housing boom.
Carr says the Government better do something on Tuesday that signals to the wider world there is a plan.
Otherwise, the consequences for the funding of the national debt and the general perception of the country could be damaged further.
© Irish Examiner Ltd. All rights reserved