Missed opportunity

Our exit from the bailout programme is undoubtedly a significant step forward for the country and one on which the Government’s PR machine is keen to capitalise.

However, before our government immerses itself and us in their planned fanfare and rhetoric, we might take a moment to reflect on the fact that, having endured almost €28bn of fiscal tightening since 2008 and €4.5bn more planned, we still have a State we can’t afford and anyone who thinks that the formal completion of the bailout marks the end of all our problems is in for a rude awakening.

* 1. The lack of real reforms means we have wasted a recession opportunity to lift the economy to a higher level and to make it more resilient to shocks. Through a combination of weak Irish political leadership and an over-indulgent attitude of the troika, opportunities have been wasted, leaving us still with an expensive public sector, costing one third of public spending.

Irish public sector workers are paid an average of 60% more than UK public servants and 71% more than their Irish SME counterparts. And it gets worse as many of the pay cuts agreed to by public sector trade unions in the Haddington Road deal are scheduled to be reversed in three years.

* 2. The necessity for the bailout was exacerbated by the foolhardy lending practices of our bankers, who have gone from profligate lenders, driven by their own greed, to the ultimate protectors of their own collective assets, slowing and stopping bank credit. There is no doubt that banks are not lending to a level appropriate to an economy “on the mend”. The statistics from our own Central Bank, the ECB, and numerous economists demonstrate the lack of appropriate credit.

Economies need efficient banking systems to manage the transmission of money value. The real challenge at the moment for the Government is to get the banks to lend again to business of all shapes and sizes, vulnerable in the short term but viable in the medium. This aspiration runs against the efforts of the banks to be profitable again after their recent near-death experience.

* 3. The third area of wasted opportunity and needing reform is social welfare, still costing €20bn. ISME, the ESRI, and the OECD have repeatedly drawn attention to the dearth of effective labour activation measures and the existence of a social welfare culture.

It is not uncommon for employers to complain of being unable to compete with the social welfare system. The Government must take these warnings seriously and make the necessary, albeit unpopular policy decisions to ensure that jobless households and social welfare traps become a thing of the past.

These wasted opportunities mean we are still borrowing for current spending, with social welfare anomalies, public sector inefficiencies, over- staffing and over-generous pensions and payouts continuing to be a problem. The Government promised real reform and have, so far, failed to deliver. To avoid what is surely the unthinkable, a further bailout, the Government must take a decisive approach to finally cutting these excessive bills.

* Mark Fielding is CEO of ISME