Storm clouds gather over Government

AS Government ministers headed for the beach after yesterday’s final Cabinet session, clouds were gathering over their plans for a long, relaxing holiday stretching well into autumn.

The first clouds began to gather as ministers sipped morning coffee in the luxurious surroundings of Farmleigh House when it emerged the National Pension Reserve Fund had lost almost 750 million over 16% of its value due to the poor performance of stock markets.

In the afternoon, the clouds thickened when the Central Bank issued a gloomy economic forecast pitching economic growth at 1.5%. Taking the optimistic view, this still represents growth but it is substantially down on the 6% level recorded in 2001.

Similarly, the bank foresees unemployment rising to 5.25%, with more jobs under threat. Endorsing the recent ESRI report, it pins its hopes of Ireland's economic upturn on the prospect of an international recovery. But inflation, at 3.5 %, remains uncomfortably high.

It was another bad day at the office for Taoiseach Bertie Ahern and his fellow ministers.

Putting a positive spin on this bleak scenario involves a leap of faith.

Doubtless, the Coalition partners derive solace from the upbeat ESRI prediction that there is light at the end of the tunnel. But it will be at least 18 months before the light starts to shine and its power will depend on global factors beyond Ireland's control.

By eventide, when Cabinet members were preparing to decamp by Mercedes for their holiday homes, the clouds had deepened as the jobs haemorrhage continued with news of more redundancies in Co Limerick.

Confirming predictions that the high rate of job losses seen in recent weeks will continue, Diamond Engineering, which makes pressure vessels for the pharmaceutical industry is closing down, letting 117 people go.

On a brighter note, despite its enormous losses, the National Pension Reserve Fund Commission claims to have out-performed other significant pension indexes. And in the long term, the Commission assures us, those losses will be recovered.

Set up two years ago to create a nest egg for the State's pension liabilities in years to come, the fund is now worth almost €7.5bn. Hopefully, for the sake of beleaguered taxpayers, whose money is being gambled on a volatile market, the investments will be recouped sooner rather than later.

To put the losses in context, it is hard to quibble with Fine Gael's contention that the money could have funded 3,500 new hospital beds.

It is a salutary thought, that if some Pension Reserve funds had been invested in infrastructure development, as recommended by the ESRI, it would have provided a more secure return.

Overlying yesterday's meeting of ministers, there was a whiff of the mantra coined for US President Bill Clinton 'it's the economy, stupid'. But, unlike Clinton, for Bertie Ahern the economy is turning sour as the heydays of the Celtic Tiger era recede into the dim and distant past.

With a December budget in mind, Finance Minister Charlie McCreevy is already busy fashioning a harsher brand of hair shirt as Christmas presents for the public. Perhaps voters will in future be more wary of politicians who glibly make electoral promises they know will soon be broken.

Against this backdrop, the improved economic circumstances predicted by the ESRI cannot come soon enough.