Martin Mansergh (Tipperary South, Fianna Fail)

The primary aim of the Government is to stabilise the economy, unemployment, the public finances and the banking sector. The problems Ireland faces are also faced by practically every other country in the European Union and the developed world and have systemic causes that cross all borders. Irish exceptionalism is not the cause of the crisis that hit us, although the vulnerabilities in each country that has been affected, including Ireland, differ to some degree.

In a debate on the crisis in New York between leading economists and commentators, reported in yesterday's Financial Times, Nobel prize winner Joseph Stiglitz blamed the bubble on the misuse of easy money after mismanagement of risk by financial institutions and lax regulation. In our own case, despite scattered warnings, society as a whole and the political system, not just the Government, became over-ambitious and over-extended and underestimated the risks.

How did we use easy money, much of which I hasten to add was well earned? The picture is mixed. On the positive side, we drove down the national debt to pre-1973 levels in real terms. We put aside more than €20 billion in the national pension reserve fund, which has been our salvation in helping us to deal with the banking crisis. We invested heavily in infrastructure and a national motorway system, which will be complete next year. There have been major improvements to public transport, there are new research institutions, schools and hospitals, and there are far better arts and sports facilities and environmental initiatives. Social welfare payments, particularly pensions and the children's allowance, were increased very substantially. We cut direct taxes - probably too much with the exception of corporation tax, which was cut to 12.5%. The latter is one of the foundations of our industrial policy. I am happy to acknowledge that was announced by Deputy Quinn, as Minister for Finance, in May 1997, but negotiated with the European Union and implemented by Mr. Charlie McCreevy when he was Minister for Finance.

In the past 20 years, we put 1 million more people to work, nearly doubling the workforce. For many years, we were consistently the best performing and most dynamic small economy in Europe, with living standards moving ahead of the EU average although we were coming from well behind. There is a positive legacy and balance sheet to be seen all around the country in virtually every community. There was also a downside. We did not just catch up in the process; we lost an important part of our competitiveness, which can be corrected in a eurozone framework only by a significant fall in prices and incomes, which is now occurring. Far too much loose money was invested in property developments that were not really needed. One of the by-products of the introduction of free third level fees by the rainbow coalition was that wealthier parents were able to buy apartments for their sons and daughters who were studying. Construction activity was further boosted by tax incentives that have been dismantled but, in some cases, perhaps not quite soon enough. Perhaps we will all now be cured of the belief that an already booming industry needs tax incentives of every kind from which the better off benefit hand over fist and that they need to be bribed and let off taxes in order to invest. Social partnership was a cornerstone of our prosperity, and we greatly improved pay and conditions, outpacing most other countries as the price of social harmony. The Opposition and the media backed virtually every spending demand on the grounds that the country was awash with money. Opinion polls confirmed that people wanted better services provided they did not have to pay for them in higher taxes, relying instead on tax buoyancy.

The sudden impact of the crisis we face has been severe. The public finances were blown completely off course. Unemployment has soared and the banking system has been under siege. Never has the intervention of the State been in such demand, not long after it had been declared almost redundant by neo-liberal ideologies. Cavalier capitalism, with all its success worshippers, has had a mighty fall, and the State, here as elsewhere, has been left to pick up the pieces. The Government has risen to the challenge. Firm action to maintain the solvency of the State and of the principal financial institutions has been vital to the welfare and living standards of every citizen of this country. We hear much criticism of the individual measures taken, but which, if any of them, are the parties opposite pledging to reverse if in government? It is natural for parties in Opposition to soft-pedal the hard decisions they would have to take in Government and imply there is some easier and fairer way of coping with our problems or that a change of personnel would somehow transform our difficulties.

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