Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am pleased to have an opportunity to contribute however briefly to this debate. Last evening, the Minister of State, Deputy Mansergh, outlined the Government's outstanding record on the economy in recent years and the nature of the short and medium-term economic challenges which we face. He emphasised the fundamental strengths of the economy which will enable us to recover quickly from the current short-term setback and to resume normal growth rates. I do not wish to go over the same ground again but, it is important to reiterate a couple of key points.

Since the mid-1990s the performance of the Irish economy has been astonishing and has resulted in average incomes beyond those in most other advanced countries. It has delivered huge increases in employment and has ended involuntary emigration. Unlike Deputy Varadkar, I do not see that as squandered years. As a result our economy is coming from a position of strength into this difficult and uncertain period. The strength of the economy is also underpinned by its flexibility and resilience echoed in the Economic and Social Research Institute's most recent medium-term review published today.

The ESRI acknowledges our sound economic and fiscal fundamentals. It points to our ability to absorb shocks in an efficient manner, to limit the economic fall-out and to return to the trend rate of growth fairly rapidly. The ESRI expects real growth in GDP of 0.75% per annum over the medium term, much higher than elsewhere in the euro area.

In terms of the short-term outlook, I share the view of others that economic conditions this year and next year will be weak and that it will be 2010 before we are back to trend growth. There is no denying that our fiscal position has weakened from that envisaged at budget time with tax revenue some €736 million behind what was expected at end April. It is important to point out however that the current situation is manageable given the strong underlying position of the public finances, which will require to be closely managed.

Notwithstanding this underlying strength, the Government is determined to take the right decisions on public expenditure. We cannot allow any unnecessary loosening of fiscal policy. Taking the wrong decisions now in dealing with short-term problems could have painful long-term consequences. This discipline on current expenditure under all headings will be critical during the next few years given the changed circumstances.

Despite the constraints on the public finances the Government is determined to adhere to its priorities of protecting the weaker in society, delivering better and more effective public services, seeking value for money at all levels of public spending and continuing to invest heavily in our infrastructural development programme. The Government will do what is right but other economic stakeholders must also do so. We need to improve our competitiveness if our economy is to rebalance itself from relying on domestic activity to more sustainable export-led growth. This means employers will have to compete harder in domestic and export markets as there will be fewer opportunities to make easy profits. Pay expectations must take into account the more challenging economic and competitiveness scenario that we face and must recognise the need for improvements in productivity not alone in the private sector but in the public service. The allocation of resources to public service pay costs must not cause a shortfall of resources for other key priorities. Pay increases in the current talks cannot undermine our competitive position and must take account of the budgetary realities.

In addition to corrective action, if we are to keep our medium-term prospects bright, we need to reassert our rightful position at the heart of Europe through a "Yes" vote on the Lisbon treaty in June. I was unable to participate in the debate yesterday evening as I was meeting with Finance Ministers in the European Union yesterday and today. This morning, I took the opportunity of addressing the US Chamber of Commerce in Brussels. I was impressed with the concern and support right across the European Union for a "Yes" vote in Ireland. The volume of positive sentiment available to Ireland throughout the European Union will be damaged by a "No" vote.

I thank the parties opposite whom I know are campaigning as vigorously as the Government for a "Yes" vote. On my return from Brussels this afternoon I saw a picture of Deputy Gilmore on Merrion Square. It may be some time before he gets further into Merrion Square but I thank him for his campaign in respect of the treaty which is important to all of us. It is important in terms of the signal we send to other European countries.

Deputy Varadkar stated that much of the inflation is due to Government-led increases. This is not correct. Government charges are not a significant contributor in the increase in the rate of inflation. Government administered charges excluding independent regulators, account for one twenty-fifth of the total weighting of the basket of goods and services which make up the consumer price index.

See this speech in context