Brian Cowen (Laois-Offaly, Fianna Fail)

I am aware of the European Commission's assessment of the Irish economy. The assessment represents a reasonable view of the Irish economy and acknowledges the overall strong position of the public finances. The assessment refers to challenges in the "transition to a period of lower economic growth, mainly linked to a return to more sustainable levels of activity in the housing sector". This is consistent with the position as outlined in budget 2008.

Notwithstanding the fact that the Irish economy is currently facing into one of its most difficult and challenging periods for some time, with domestic and external factors likely to restrain growth prospects in the short term, it is important to recognise that our overall growth performance is still impressive by international standards. Indeed in the press release accompanying the assessment, the commission notes that Ireland is adjusting to "more normal, but still very healthy, economic growth levels".

On a general Government basis, we have recorded surpluses in ten of the past eleven years and we also have one of the lowest levels of public debt in the EU.

Fiscal policy is playing a key role in terms of providing support for the economy as we enter this period of lower growth. Current spending is projected to rise by about 8% this year while tax revenues are expected to grow by around 3.5%. It is acknowledged that in the medium term we cannot continue to have expenditure growth rates well in excess of resources. Reflecting this, more moderate levels of increase in current expenditure are planned. This will be done in a phased and responsible manner. A measured deceleration in current expenditure growth is what is required as we enter this period of below trend growth.

Capital spending is expected to grow by approximately 12% this year as full implementation of the national development plan continues at pace. Even allowing for all this, only a modest deficit is in prospect for 2008. As I said at budget time, we are borrowing modestly to invest ambitiously.

The Government accepts that there can be no unnecessary loosening of fiscal policy and, in that context, the implementation of the national development plan remains a key priority. It will help boost the productive capacity of the economy and lay the foundations for future growth.

In the area of pensions, the Government is committed to putting in place a system that is financially, economically and socially sustainable. The recent Green Paper sets out a range of measures that could help in this respect and the consultation process currently under way provides an opportunity for all to consider and to provide their views in that context.

See this speech in context