THE author of the Economic and Social Research Institute’s (ESRI) spring bulletin says the European Central Bank (ECB) should inject €50 billion in interest-free loans into the economy to help the Government resolve the banking crisis.
Joe Durkan, who is an associate professor at the ESRI, said the banking crisis represented a failure of governance across Europe and we should not have to carry the can on our own.
One of the difficulties was the absence of a single authority to address the crisis in Europe as it unfolded.
By contrast, the US and British governments have acted in the past to protect their banking systems and funnelled billions into the banks to ensure they did not fail. With “no central government” to perform that function in Europe, the ECB should act by injecting €50bn into the economy, which would knock about €2.5bn off our annual interest payments.
He said we should press on with our demand for a cut in the interest rate on the bailout fund, adding there should be no concessions made on our corporate tax rate as a quid pro quo.
It was wrong that we “should have to bear the whole burden” of this financial crisis, he said.
The Government, through its actions since 2008, prevented the failure here from spilling over into the rest of Europe and that has to be acknowledged by Europe without any further conditions being imposed, he said.
He also called on the Government to cut public sector wages and said he was willing to take a 20% cut in his salary as part of that process.
Public sector wages were at one point twice the national average wage, but went way out of line during the boom years as the sector succeeded in pegging its salaries to well-paid bankers and other high earners, said Mr Durkan.
The spring bulletin says that, in the current predicament, the government should introduce a property tax, a tax on water and address the issue of car tax with a view to raising income.
Cutting spending is the other side of the coin and Mr Durkan said we did not need another review of what can be done.
“We already have had a review” from Colm McCarthy’s Bord Snip and we just need “to get on and do it” at this stage, he said.
While calling on serious concessions from Europe, Mr Durkan said our credibility with financial markets was critical to how we emerge from this crisis.
He believes we should eradicate the budget deficit totally in 2014. That would speed up our return to the bond markets and we should pile on the pain in the next few years by delivering the cost savings without delay and imposing higher taxes. If we get to the pont where we no longer are running a budget deficit, then our debt repayments become more manageable and our ability get back as a fully functioning economy is speeded up, he said.
By imposing taxes and making cuts, the government could afford to reduce the burden on businesses to allow them to create jobs and generate better growth than is indicated in the latest ESRI analysis, he said.
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