‘No real end in sight to Ireland’s recession’

THE European Commission has said there is no real end in sight to Ireland’s recession and cut this country and the rest of Europe’s growth figures for the rest of the year.

While most countries should turn the corner and see a gradual recovery next year, Ireland will take longer to return to growth, the spring economic forecast said.

Finance Minister Brian Lenihan, however, is not as pessimistic, saying that forecasting economics was like trying to predict the weather – a very inexact science.

But the EU’s Economic and Monetary Affairs Commissioner Joaquin Almunia warned: “Ireland is facing a protracted and deep recession and the improvement will be slower than others in the euro area.”

The dramatic collapse in the housing market, the quadrupling of unemployment and the continuing bad news from Britain, one of the country’s main trading partners, has exacerbated the situation.

Even with the searing cuts and increased taxes of April’s budget, the deficit will widen further to 12% of GDP, by far the highest in the euro area.

This will increase further to 15.5% next year if the Government does not introduce more measures to increase revenues and cut spending, the forecast warned.

The Government’s debt ratio will triple to 75% next year and could be much higher if any of last September’s bank guarantees are called in.

Unemployment will jump to 16% next year, up from a projected 13.3% this year. Wages are expected to drop but allied with a slightly increased productivity this should restore some of the country’s lost competitiveness, the forecast says.

The cost of living should be cheaper for householders helped by a drop in energy prices this year resulting in negative inflation, even after the indirect tax increases of the budget.

Mr Almunia praised the Government’s actions so far saying they had done a good job, but added that the recession was hitting Ireland’s economy hard.

Mr Lenihan, in Brussels for a meeting of euro area ministers, agreed that the figures were very bleak but said the Government believed the recovery would come sooner than the Commission predicts.

“The recession began earlier in Ireland and our exports remain strong compared to other countries that are experiencing double digit declines,” Mr Lenihan said.