'Decisive action' needed to tackle worsening economy

The Government today decided to rush forward the Budget by almost two months to October 14 in light of the rapidly deteriorating economic situation.

With job losses, rising prices and falling tax revenue, figures released today showed unemployment has jumped to 6.1% - a 10-year high.

The Government, which today held its first Cabinet meeting since the August break, said moving the Budget from the first week in December will give clarity and confidence to investors and taxpayers and lay the foundations for a recovery.

Finance Minister Brian Lenihan said he will aim to stabilise and restore balance to the public finances by prioritising current and capital public spending to reflect the changed situation.

A Government statement said: "The Government is committed to giving clear leadership in the context of the strategic priorities of the Programme for Government in order to boost confidence in the underlying strength of the economy, to encourage faster development in key sectors to protect the environment and to build sustainable competitiveness in the economy as a whole."

The Government is to prioritise capital investments within the framework of the National Development Plan and the Programme for Government "which most support those objectives".

Mr Lenihan said weaker international conditions including slower growth and the impact of the credit crisis, combined with the developments in the housing market in Ireland were having a major impact.

He predicted a tax shortfall of at least €5bn for 2008.

"The Government is moving to protect the gains that our country has made by ensuring responsibility in the public finances," he said.

"Taking decisive action now is critical to our future sustainable growth.

"We are better placed than most economies to meet the challenges ahead with our low debt rate, our educated and young workforce, and our low tax environment for workers and business."

Some 247,384 people are now signing on the Dole - a 42% rise in the last year - prompting economists and the opposition TDs to warn the downturn could worsen.

Unemployment, as measured by those on the Live Register, stands at 6.1% - a level not seen since December 1998.

Leo Varadkar, Fine Gael's enterprise spokesman, accused the Fianna Fáil led Government of promoting botched economics and of blowing the boom.

"(Taoiseach) Brian Cowen and his Cabinet need to stop blaming overseas factors and start accepting responsibility for an economic crisis which is largely of their own creation," he said.

The Fine Gael TD went on to brand Ireland the sick man of Europe.

The number of people on the Register increased by 73,000 in the last 12 months, the largest annual rise in the series which dates back to 1967.

However, experts cautioned that the labour market has doubled in those 40 years and the unemployment rate was less than half the 16% figure recorded in the recession of 1988.

Despite Exchequer returns falling well below Government forecasts and a €5bn hole in the books, Ulster Bank chief economist Pat McArdle said things should turn round in the next 18 months.

"This is not near as bad as it would seem," Mr McArdle said.

"There's no danger that people are seeing the Irish economy in as bad a state as it was in 1988."

The alarming unemployment levels are likely to feature heavily at talks on Friday after the Taoiseach invited the social partners to return to negotiations on a new wage deal.

Willie Penrose, Labour Party enterprise spokesman, claimed the Government has no plan to tackle the crisis.

"So far, their solution to the economic downturn has been to cut public services, in a ridiculous book-keeping exercise," he said.

"They have no strategy to deal with the accelerating jobs crisis.

"Our economic problems have been caused by the incompetent mismanagement and self-serving behaviour of the Government."

Mr McArdle predicted 270,000 people will be seeking benefits by December bringing the social welfare bill to massive €100m.

"It remains to be seen whether outward migration will ease the situation later in the year. So far, it appears that non-nationals are staying on the Register for the time being," the bank chief said.

Business federation Ibec said companies were facing major challenges from the credit crunch, the cost of energy, the dramatic downturn in construction and consumer confidence.