It’s time for all political parties to start thinking the unthinkable

THE final count is over. The political theatre and drama has delivered the expected results. Fine Gael is the largest party in local government with more than 330 seats. Labour is the big Euro winner with a gain of two seats, while FF, FG and SF each lost a seat. I can’t resist recalling my original predictions in this column of 30th April, forecasting 11 of the 12 MEPs — Joe Higgins being the elusive MEP.

The future narrative of national politics seems foreseeable. The FF/Green government will circle the wagons and limp on in a weakened state. With each unpopular measure, the clamour for change will escalate. Eventually they will buckle on some specific issue. The resultant general election will see a change of administration. FG and Labour could obtain an overall majority, without smaller parties. While the faces may change the problems won’t. After a honeymoon, they will suffer unpopularity through harsh medicine. A resurgent FF will provide outright opposition. The political wheel will rotate again… The past pattern of politics converts to history. This presupposes ordinary economic and social circumstances. Sadly, our problems are overwhelming. Exceptional difficulties face whoever is in government. A national unity government is a non-runner. Twelve years of Fianna Fáil makes such an option impossible. The valid blame game, cronyism and extent of their denial all lead to conflict rather than co-operation.

The proposal of a multi-party government is naïve and undemocratic. It presupposes FF’s entitlement to remain in office. From 1987 to 1989 Alan Dukes’s Fine Gael enunciated the “Tallaght strategy”. This meant not opposing unpopular budgetary measures in the Dáil. The Haughey administration did not have an overall majority. Politicians only make concessions if it is expedient for themselves. Opposition parties now smell blood — an early election offers them the real prospect of power. If they get their wish, they may find in government that the country is ungovernable as their popularity plummets. Vested interests will resist essential economic reforms.

Whoever is in government has the sole burden of the country’s problems. Media scrutiny of opposition is understandably lightweight, inconsistent and vague. We need to construct a political basis for new parameters of policy conflict between the main parties. Let’s agree on the following known knowns: Public finances. The 2009 budget arithmetic is utterly unsustainable. Current spending of €56bn is mismatched with €36bn in revenue. The resultant €20bn deficit, plus capital spending, has to be borrowed. The NTMA has obtained €13bn already this year and is in the market this week for more. Our sovereign credit rating has been down graded twice to AA status — the worst in the eurozone.

Bord Snip’s report on public expenditure cuts is due to be published shortly. The commission on taxation is set to propose a residential property tax, taxation of child benefit and carbon levy. I advocate a national political consensus on the overall level of Exchequer Borrowing Requirement and current budget deficit.

Civil and Public Service reform. Public sector pay exceeds €19bn. Reforms in the areas of productivity, reduction in staff numbers, absenteeism, redeployment and rationalisation of quangos are necessary.

Fixing the Banks. We can opt for NAMA, nationalisation, recapitalisation, state guarantees or a toxic debt insurance scheme. There are up to €90bn of Irish bank loans that are non-performing and will be impaired. The total toxic net losses will be between €20bn and €30bn. A medium term strategy is required to crystallise these debts, restructure the financial institutions and provide credit for SMEs. Also the pension fund crisis of €30bn has to be tackled. Employment. FÁS estimate the live register could peak at 600,000. Strategies are required to sustain existing jobs, improve the competitiveness of our exports and reduce energy costs. Growth opportunities for strategic job creation need to be agreed.

Lisbon Treaty. Further rejection of the Treaty would isolate Ireland. If all other 26 member states adopt it and we refuse to do so, despite our protocol, there will be profound damage. A mechanism will be found for the EU institutions to modernise without us. This will compound our geographic peripheral location and small population base. Future foreign direct investment will be undermined. Social solidarity. Notwithstanding the retrenchment required in public expenditure and services, a base line is needed to protect the least well off. Welfare, Health and Education benefits and services should be reclassified. Other areas will be subject to cost savings.

My proposal is direct dialogue between the Government and opposition. Here’s the deal: The Government would agree to hold a general election within a year. In return, all parties would agree to a three-year period of underwriting political fiscal boundaries. This may seem utopian. It would have mutual political benefits. It would offer an electoral contest to gain government for the opposition. They would be insulated against excessive attack in the first two years of tough measures. For Government it allows proper debate on our economic and social affairs rather than crucial issues being subject to naked political opportunism. Everybody would be on the same page. Such meaningful cross-party political dialogue would not remove inter-party competition, debate and ideas. Rather it would just define the overall territory within which it would be conducted. In good times, all parties were happy to agree on the Department of Finance’s annual 4% GNP growth assumptions. Is it too much to expect of our politicians to invoke the national interest and agree on underlying fundamentals again? The body politic is increasingly the focus of public contempt.

Last week saw the election of protest candidates who will viscerally oppose all measures of fiscal correction. There is an onus on the main parties to act responsibly and put the country first.

Many independent supports are available for a national consensus. ICTU, IBEC, the ESRI, Central Bank and other private and public institutions could provide non political support to such a National Accord. Internationally, the EU Commission and ECB would be supportive of a clear determination that our political system is coming to grips with the gravity of our economic problems. This would include credit for an agreed limitation on the overall level of our national borrowing and debt/GNP ratio over a five-year period.

The depth and severity of our problems cannot be overstated: 20% unemployment, national debt in excess of 100% of GNP and insolvency in our banks could provide a lethal cocktail of paralysis. Drift, inaction, bickering and point scoring have their place in politics — but not now. There is a serious onus on Cowen, Gilmore and Kenny to start thinking the unthinkable.

Last week’s election results give us a lame duck government with weakened authority and credibility. The verdict suggests change but does not deliver it. We have the worst of all worlds. Economic problems are compounded by political stalemate. Fear and weakness on the government side is matched on the opposition by frustration and opportunism. It’s time for new thinking and leadership.