Tony Killeen (Clare, Fianna Fail)

Ba mhaith liom mo chuid ama a roinnt leis an Aire, an Teachta Padraig Ó Ciardha.

The Government strategy to deal with our current economic challenges and put Ireland back on the road to growth has three main elements. These have been set out in previous debates on this issue. The most important of them is the element that is currently under consideration, namely, the stabilisation of the public finances. The second element is the restoration of the banking system to ensure it is operational and we are able to do business international as a small, open economy. There is widespread acceptance that the measures taken in this regard have been necessary. The third element is to restore and enhance Ireland's competitiveness.

In the context of the four year plan, which is the background against which this debate is being held, one of the questions frequently asked relates to the growth figures that will underpin the programme. These figures are determinants in setting the €15 million target we must meet in reducing the Government deficit. It is worthwhile recalling that the growth targets on which every Government operates are based on figures provided by bodies such as the ESRI, Central Bank, International Monetary Fund, European Central Bank and other central banks, the European Commission and a host of banks and brokers active in this area. Officials at the Department of Finance analyse the figures provided by these institutions and, on the basis of the available evidence, produce a likely scenario against which decisions must be made.

Many people have been seeking definitive trends and forecasts. Anyone who does not accept that the business of forecasting is based on the best available information and data is refusing to face reality. We must also remember that Ireland has commitments under the Stability and Growth Pact which predate our current difficulties. This is the background against which measures will be taken.

The current shortfall in the public finances is of the order of €19 billion. This raises two difficulties. First, we must access funding of €19 billion to be able to provide services to the standards we currently enjoy. The second difficulty, which is extremely important in the current climate, is that we must be able to access funding at a reasonable cost. One of the difficulties we have encountered in recent times is that the cost of borrowing has increased dramatically. This has an impact on our capacity to provide the type of services we need.

On the positive side, we do not generally give ourselves credit for the fact that we have, over the past two and a half years, managed to make adjustments amounting to approximately €14.5 billion. This figure is close to the cumulative value of the adjustments we must make in the coming four years. We made the previous adjustments successfully, although I concede that they created difficulties for people and had an impact on growth projections. Nevertheless, we have de facto reached the halfway point in terms of achieving our objectives in that regard, which is highly encouraging. A host of other encouraging figures also need to be considered.

It should be acknowledged that we are trying to achieve growth and address the nation's finances against a difficult economic climate. Across the world, growth levels are negligible and in some cases negative. This creates difficulties for small, open economies such as Ireland. That we need to export 90% of the goods and services we produce - in some sectors the figure is higher - makes the challenge even more difficult for us. In addition, it is an external factor over which we do not have control.

We must also acknowledge that Ireland's GDP figures are in deficit to the tune of approximately 12%. The banking crisis has a once-off impact in 2010 and will not arise in subsequent years. If one considers the historical position in 1986, the GDP deficit then was in excess of 13%. Two years later, however, in 1988 on foot of the adoption of strong measures and of cuts in particular, that deficit had been reduced to 3.3% with a negligible impact on growth. There are counterintuitive indications that, in some circumstances, addressing the fundamentals of a country's finances has the opposite effect to what one might expect in respect of elements of growth. However, in the case of other elements it is clear that cutbacks in expenditure in particular are likely to have a negative impact on growth and this is a judgment that must be made as one goes along.

In another positive feature, particularly when one considers the late 1980s, it must be borne in mind that at present, 1.8 million people are employed in Ireland, which is very close to twice the number who were in employment at that time.

The projections, which are based on there having been little or no growth internationally and less growth in Ireland than was expected, have led to the position whereby we face €15 billion in adjustments. If one looks back at the reasons for the different forecasts made last year, one does not even need to look back that far to find considerable growth, because in the first quarter of 2010, GDP grew at the extraordinary rate of 2.25%. This rate then was followed by a fall in GDP of 0.25% in the second quarter. It is clear, therefore, that a trend did not emerge of growth either quarter on quarter or year on year. However, if one considers the impact on GDP during the recession, I note the decline in GDP in 2008 was approximately 4% while it declined by a further 10% in 2009. This year, in 2010, this fall in GDP value will have reversed and the figure will come out roughly even, that is, either slightly above or below the zero mark. However, this is a strong indication that notwithstanding the removal from the economy of the huge sum of approximately €14.5 billion in real terms, we experienced that change from a decline of 10% to the zero mark.

At one level, therefore, highly encouraging signs are evident. They are even more encouraging if one considers manufacturing output or the growth in exports. There have been quite extraordinary achievements in that regard, particularly given that many Irish exports go to economies in which there is no real growth or that face extraordinary challenges regarding their capacity to buy goods and services. Moreover, one must take into account the currency fluctuations that have created enormous difficulty in some markets for Irish exporters. While it must be acknowledged that the decline in the value of the euro has benefited exporters to the United States market and some others, there has been considerable volatility in the world markets.

When one considers the events of the past year, the cost of addressing the banking crisis has been established, satisfied, done and dealt with. For the next decade or so, there will be an additional ongoing cost of approximately 10% arising therefrom. However, this means the cost of addressing the country's finances constitutes approximately 90% of the problem. Therefore, the great bulk of the problem relates to the issues arising from our own national finances and this is an issue with which one must deal and to which one must face up.

An important element in respect of growth is translating such growth into job creation with as much speed as possible. Against the highly difficult background in which we have operated last year and during the first half of this year, a little more than 50 foreign direct investment announcements, accounting for more than 4,000 jobs, have been made, which is a positive achievement. Moreover, the Minister for Enterprise, Trade and Innovation is on a three-city tour of the United States at present to meet foreign direct investors and he will go on to the Middle East next week with the agencies. One must bear in mind that the impact of such visits and the work of the State agencies is highly positive and succeeds in bringing people into Ireland with foreign direct investment, thereby giving rise to huge job creation opportunities.

One must balance the message. One must realise that notwithstanding the difficult and somewhat daunting challenges we face, the experience of the last two and a half years demonstrates that the policies pursued by the Government have brought us a considerable number of steps along the way. Moreover, continuing to adhere to such policies undoubtedly will address the difficulties that have beset the national economy and will return us both to appreciable GDP growth and to a jobs spin-off therefrom.

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