Cowen’s gambles could bring a crash landing

I DON’T know about you, but early on Wednesday morning I assumed the worse.

The moment I got into work I sat down at my desk, crouched forward, put my head between my knees and assumed crash position.

That guy Cowen, I reasoned. He didn’t know what the hell he was talking about. Do you remember when he was going on about a soft landing in the property market last year?

A soft landing? Viewing the ruins of the property market this winter was like looking at London after the German bombing campaign of 1941.

Cowen had taken a chomp out of a reality sandwich since then. In the run-up to the budget he painted a picture of the economic landscape that reminded me of another time and place. Let’s go for a nostalgic trip down memory lane. Let me bring you back to the early 1980s when teenagers sported mullets and flecked trousers and they all bought one-way tickets on the Supabus to London or on Ryanair to Germany.

The buzz phrase that has defined the past decade has been the ridiculous Celtic Tiger. Well the one that defined the early 1980s was less ridiculous but boy was it grim. And if I’m not mistaken the words first formed on the lips of Charles J Haughey. It was: “doom and gloom”.

For weeks and weeks before the budget, Cowen was incapable of uttering anything that didn’t smack of doom and gloom. Granted, he wasn’t quite phrasing it in such desperate language. But the message was clear. After years of quaffing champagne with Charlie we’d have to slum it by drinking Dutch Gold with Cowen.

But then an amazing thing happened. As we absorbed the hour-long speech on Wednesday, we searched in vain for pain. There was little to be found. Sure if you were a chain-smoking Porsche driver who happened to purchase an expensive house a month ago, you were on a loser. But the rest of us walked away from what we thought was a crash without even a scratch. Tactically, Cowen was clever in the run-up to his fourth budget. He dampened expectations, accentuated the negative, reminded all and sundry that the property market was contracting; that growth had slowed; that the public service was in bad need of reform; and that the days of double-digit increases in current spending had come to an end.

Fianna Fáil had also learned from the dog’s dinner it made of the 2002 election promises. This time around, Fianna Fáil had promised dozens of goodies. But at the end of each press conference during the election campaign, Cowen would remind people that terms and conditions applied. Everything was predicated on growth rates of 4.5% or more. When that didn’t happen, Cowen was able to go to fallback position without sounding like a hypocrite. He could deny tax cuts, PRSI cuts, extra teachers and extra guards because they would only be granted if the boom had continued. His default commitments were to the National Development Plan and to health and education. Still, if money was too tight to mention, why did we get no pain in the budget? Well there were a few stealth taxes here and there (motor tax and medical charges).

It was all made possible by two cavalier decisions by Cowen that reminded you of the swagger of the Charlie McCreevy era. One was his U-turn on stamp duty. He came up with one of the ugliest phrases I have ever heard to explain why he did this. It was, he said, a “countercyclical measure”. In ordinary parlance, that’s a 180-degree turn. But he will get away with it because people’s cynicism over FF completely changing its mind on stamp duty in six months will be trumped by the positive vibes it will have for home owners.

The other bold gamble Cowen took was to borrow heavily for the first time in a decade. Fine Gael rightly pointed out the €5 billion of borrowing next year represents a whopping €7.2bn turnaround in fortunes between 2006 and 2008. The Tánaiste described it as “modest” but it is more than that. The national debt will increase 50% over the next three years. It may just pay off, though the creep in the unemployment figures and the fall-off in job creation are both worrying. But if both gambles fail, we will all too soon find ourselves crash landing back into the 1980s landscape of “doom and gloom” quicker than we can say “countercyclical measure”.

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