FINANCE Minister Brian Lenihan was accused of being “dangerously in denial”, after claiming the economy has stabilised, as the international press warned of a “much deeper depression” if the Government’s banking policy does not change.
Mr Lenihan said the country is “at the bottom of a very difficult recession but the early, tentative signs of growth are there and that will continue and resume.”
The Labour Party said he was “delusional” and there was “no sign of recovery” in August’s Exchequer figures, published yesterday. They showed the Government spent €12.1 billion more than it collected in tax in the first eight months of this year. This deficit was lower than the €18.7bn reported this time last year.
The state collected €18.9bn in tax receipts in the first eight months of the year, which is a drop of €20.8 million on last year.
It is just €141m or 0.7% of what the Government had expected in the budget for this year.
“We are on target, our forecasts have held up and out budgetary figures do add up and that is very important in terms of the type of commentary we have seen about the country in recent weeks, which has suggested this country is in real fiscal jeopardy,” said Mr Lenihan.
Labour’s Joan Burton said he was delusional: “If the minister believes his own claims, it can only mean he is dangerously in denial about the real situation in the national economy.”
Writing for the New York Times, the former chief economist at the International Monetary Fund (IMF), Simon Johnson, warned of a much deeper recession in Ireland and a high risk of default: “Watch for renewed emigration from a famously footloose population,” he said.
“If current policies continue, the calamity of the Irish banking system will lead to a much deeper recession and the consequences will be felt for decades.”
The newspaper’s second negative report about Ireland this week said: “Financial markets are beginning to see Ireland as Europe’s next Greece.
“In the last few weeks, the perceived probability of default by Ireland (as traded in credit-default swap markets) has shot up, so that markets now price a 25% risk that Ireland will default within five years.”
Yesterday’s tax figures show a drop in the main categories of tax compared to the same period in 2009:
- Income Tax down from €7.2bn last year to €6.6bn as the number of people out of work is higher than what the Government expected.
- VAT down from €7.2bn to €6.7bn as retail sales remain weak.
- Corporation tax down from €2.4bn to €1.8bn.
Mr Lenihan said unemployment is near its peak or may have already peaked after figures this week showed there are 455,000 people out of work.
The New York Times reported that children being born in Ireland now ”will be paying off debts for decades to come”.
© Irish Examiner Ltd. All rights reserved