Dick Roche (Wicklow, Fianna Fail)

We have transformed our economy into one where more than 2 million people are in employment. However, as Deputies will be aware, the economy is entering a more challenging period. That is true not just of this economy but of economies around the world. Domestically, the pace of transition for new house building to more sustainable levels of output is having a significant dampening effect. Global economic developments are compounding the current situation. The credit crunch has become a global reality. A continuation of international financial market difficulties, rising food and commodity prices, adverse exchange rate movements and a general weakening of the economic outlook in several of our major trading partners will cause problems in the months and perhaps the period ahead. The impact of this combination of domestic and external shocks is reflected in the recent disappointing economic news. I agree with Deputy Gilmore that, as if all this were not enough, we now must deal with the uncertainties that have arisen as a result of last week's decision in the referendum.

Although we are facing into a number of short-term difficulties, the economic prospects beyond these still remain favourable for this country. While there are real risks, we cannot lose sight of the fact that the underlying health of the Irish economy is good and the economy has responded quickly and effectively to difficulties in the past.

In the past ten years, the rate of economic growth in Ireland has averaged 7% per annum and that is why I do not recognise where the last contribution was coming from. This very strong rate of expansion has facilitated a convergence in Irish per capita incomes to and beyond those enjoyed in other advanced economies. Among the economic strengths that underpin our economic resilience are that the public finances are sound, with one of the lowest levels of debt in the euro area. This is something that we must continue to protect. We must learn from the mistakes of the past. The soundness of our public finances will allow for the continuing maintenance of a framework of macro-economic and budgetary stability which will be crucial in the years ahead. It is important that we defend this position in the months ahead and that we focus particularly on sound public finances.

In addition, our markets are flexible, allowing us to respond quickly to difficulties, we have a dynamic and well educated labour force, we have a pro-enterprise oriented society and the taxes for workers and businesses are low. We must ensure that we keep our taxes that way. Not many countries in the world are facing the present economic difficulties from such a position.

On a further positive note, through the progressive delivery of the productive investment priorities in the national development programme, the Government is helping position the Irish economy to take advantage of a future upswing in the global economy, improve our competitiveness and provide a better quality of life for everybody in the country. The investment in economic infrastructure and human capital will help boost the productive capacity in the economy.

This perspective on the positive medium-term outlook for the Irish economy has been shared recently by the Economic and Social Research Institute in its Medium Term Review 2008-2015. Due to our sound economic management and the underlying health of the economy, the institute agrees that the Irish economy is flexible and resilient and has the ability to absorb a downturn.

On the issue of employment, a number of Deputies referred specifically to the downturn in recent times. It is worth reminding ourselves that over the past decade employment has continued to grow dramatically. It has risen to the point where there are 2.1 million at work at present. When we joined the European Union, in spite of the advices from the Sinn Féin Party, fewer than 1 million people were at work. This improvement has resulted in halving the unemployment rate from 10% over the most recent period. We all are aware of the impact that unemployment has on those directly affected as well as on their families and on the wider communities in which they live. The recent increases in unemployment are deeply regrettable. However, despite the recent upturn in unemployment, Ireland still has one of the lowest unemployment rates in the euro area. It is generally accepted that the strong rate of employment growth experienced in recent years could not continue and the economy is entering a period of adjustment.

While the slowdown in house building has resulted in increased unemployment in this area, overall employment is forecast to continue to grow. The big challenge for us in the period immediately ahead will be to deal in particular with people who need to upskill. FÁS is providing a range of job-related services, supports and programmes to assist people to remain in the labour force.

On recent developments, we are all aware that Ireland is a small open economy. It is simply a reality that we are a price-taker, not a price-fixer, and the prices we must take will obviously have inflationary impacts. In the short to medium term, what the Government can do includes implementing responsible fiscal policies and promoting competition and increased price transparency through the work of the Competition Authority and the National Consumer Agency, which can address some of the negative impacts of the prices we must take. Over the longer term, the considerable investment in public infrastructure undertaken by the Government will enhance our ability to produce more goods and services on a more economic basis.

From a competitiveness perspective, I stress the importance of ensuring that the externally-driven price increases that we are currently experiencing are not exacerbated by internally-generated second-round effects. Deputy Burton made the point about stagflation, and she will recall that this was precisely the formula that caused stagflation in the 1970s.

Deputy McManus made a fair point about fuel prices. The reality is we are experiencing an international phenomenon that will have an impact. However, it is not truthful to suggest, as was suggested, that the Government has been unconscious of this. Measures are in place to help those in greatest need under the national fuel scheme. The household benefits package includes a free electricity or gas allowance. The gas allowance was extended in the 2008 budget. The supplementary welfare allowance scheme provides additional mechanisms.

It is fair to say we are going through a period of unprecedented economic turmoil. The most important response we can have to this is to ensure we keep our heads in terms of economic policies, that we keep a particular focus on strong public finances and that we do not fall back into the ways of the past and borrow to try to deal forward. It is critically important, therefore, that in more challenging times we do not take the wrong steps, steps so frequently advocated by Sinn Féin, in particular.

Going back to the point about the referendum last week, I agree this adds an additional challenge but we have shown in the past that we are capable as a nation, a people and as a Government of dealing with challenges. We look forward to doing that in the months ahead.

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