Bertie Ahern (Dublin Central, Fianna Fail)

We should be realistic. Deputy Kenny knows or will at least be aware that since 12 August there has been a financial market crisis throughout the entire world. That has had a knock-on effect into the last quarter in a very severe way on practically every economy of OECD countries — effectively the whole world. From a very strong position in the middle of the year, there have been ripple effects right through all sectors of international economies. It is not only in the United States, where there has been significant job losses and company closures, but throughout European communities.

It had long been predicted that we would see a slowdown in our housing market and whether it would happen in 2006, 2007 or 2008 was the only issue of debate. We had been building at a rate of between 70,000 to 88,000 houses per year, with the latter number the figure for 2006. It was not sustainable to build houses at four times the rate in the United States of America, six times the rate of the United Kingdom and approximately eight times the rate in the rest of Europe. That is not a surprise. While unprecedented numbers of houses are being built and unprecedented numbers are in employment, the figures are pulling back. House building is a labour intensive industry and I have said several times in the past few months that there has been a deterioration in labour market conditions, which was expected.

Available data show that employment in construction went well past that peak in the last quarter of last year. Employment in other sectors, however, is expected to offset the decline in construction, although in aggregate terms only a modest increase in employment is in prospect. The figure predicted at the beginning of the year was 24,000 net new jobs, equivalent to an increase of approximately 1%. For the past few years, employment has grown by approximately 3.5%. When the figures are placed side by side, one can see the difficulty.

At an aggregate level, there has been some decline in house prices over the past few years. That appears to reflect several factors, including the large increase in housing supply and the fact that a number of houses — it is debatable how many because different commentators give different figures — in the market, caused by an oversupply, have not been sold which has created a drag in the market. It will be some time before that moves through.

In other sectors, employment is still high. We are the fifth largest exporter of international services in the world. In manufacturing, we continue to be strong despite what people predicted a few years ago. We have lost some manufacturers, such as Allergen in Arklow last week, but today Zimmer, one of the top companies in the world, announced that it is coming here for the first time, with a €50 million investment. This shows an underlying confidence in the Irish market. Both companies are medical suppliers, one pulling out and going to Puerto Rico, the other coming here for the first time. We will see some results from that, depending on the product.

Other countries are putting the financial stimulus and impetus into the market that we have already put in. We have significantly increased the capital programme, with the State's investment of €8.4 billion which will help to drive the economy in many areas. That is approximately 1.5% of GDP. Other countries are considering a similar measure, as well as some of the changes we have made in tax policies for indigenous companies through the business expansion schemes and others. This is a difficult time, although over 2 million people are working and employment is increasing and we have a strong position on the purchasing index.

We do not need to knock this country as others in the financial services sector in Europe are trying to do because we are a strong competitor in the foreign direct investment market. I am not saying Deputy Kenny said that but he is aware that at least two operators in Europe have been doing this for the past few months. We must be conscious of that aspect.

Everyone is facing difficulty, and we must manage our difficulties, but this year we are talking about growth at 3%, with a low debt to GDP ratio, the ability to have a high capital programme and to continue to win significant foreign direct investment. We must manage ourselves through this position and we have already taken action. In terms of what else we need to do, we need to focus strongly on where the gains are for us. The issue is not about exports and imports; if our net exports are stronger than our imports, that adds growth. We get to that position based on productivity.

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