Bertie Ahern (Dublin Central, Fianna Fail)

In the first week of December when we presented the budget we mentioned the downside risks. The Minister for Finance made it clear that we were examining a number of concerns about 2008. That was one of the reasons we put a fiscal stimulus of 1.5% into the budget, again reformed the stamp duty regime and revised the size of our capital programme to ensure we continue to inject investment into the economy at record levels and higher than our EU partners to sustain and maintain fiscal stimulus during 2008.

It is true, as the world knows, that there are a number of difficulties. It is quite clear that the global economy is characterised now by greater uncertainty than in the third quarter of last year and is certainly worse than the fourth quarter. There are a number of issues which we must take account of, including the potential for further euro appreciation against the US dollar or sterling and the rising probability of a house-production recession in the United States, with knock-on effects in the wider US economy and possibly the global economy. These issues are being discussed daily. The possibility also exists for further oil price increases, although they have gone up and down in the last month. The financial market difficulties which Deputy Kenny mentioned could persist and could spill over and affect the real economy. On the domestic side, there is a risk of a potentially steeper decline in new housing output. These are all issues that we must be clear on.

We have taken action already in the budget, as I have said, regarding the capital programme to inject resources into the economy. The housing market here is slower. I was continually answering questions about overheating in the market some years ago, but there is a correction taking place in that market. Some 88,000 units were built a few years ago. The Department of Finance figure is 55,000 for this year, although the view is that after the correction, we will move back into a more sustained position of building 60,000 units a year.

In the meantime, there is, and will continue to be, a decline in employment in the construction sector. That has already been happening. It happened in the last quarter and will continue into this quarter. However, that does not take away from the huge amount of activity in other areas of the construction sector. The capital programme includes, in one form or another, road building, capital development in health and education as well as infrastructural developments and incentives in other sectors.

As the Tánaiste said on budget day, 2008 will be a more difficult year to manage. However, notwithstanding all of that, the projected growth rate is still in the order of 3%, which is better than many of our competitors. When we look at 2007, we see it was a strong year for economic growth and employment, with strong outturns. We have had surpluses for ten of the past 11 years. I am sure I do not have to remind Deputy Kenny of the strong position of the national finances, whether in terms of debt, the current budget deficit or the fact that we are funding a major capital investment programme from our own revenues, which very few countries in the world could do and we could never do in the past. These are all points on the plus side but it is a year for careful, close management of the economy. As myself and the Tánaiste have been saying for the past few months, this requires close management, close watching of the international situation and the utilisation of our strengths. One of our strengths has been that we are a flexible economy. Our exports are not in decline, as Deputy Kenny maintained, but are on the rise. We must manage these issues in a careful and prudent fashion during this current year.

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