Frank Fahey (Galway West, Fianna Fail)

Our economy is currently experiencing some difficulties, but a sense of perspective is required as we seek to adjust to the changed circumstances. We must acknowledge that the housing market is going through a painful but necessary correction, that conditions in global financial markets are very challenging, that the outlook for our trading partners has deteriorated and that our currency has appreciated markedly on international exchanges. The immediate outlook is difficult and growth this year will be modest by our recent standards, but there is still much for us to be positive about. We should discourage any attempts to talk down the economy. I have little time for the prophets of doom. Now is the time for us to pull together and do our utmost to return the economy to its previous position of high growth.

The measures announced yesterday by the Minister for Finance are designed to ensure that public spending in the current year is managed so that emerging pressures can be accommodated within the planned expenditure level for 2008. It is about laying down a sound strategy for the next few years. This is a period of transition for our economy. We are moving from a time of unparalleled economic growth to a reduced rate of growth. It is worth bearing in mind that our economy is still one of the best performing in the EU. Now is the time for us to lay the groundwork for our economy to take advantage of future upturns in the international market.

Government is about confronting challenges. This particular challenge, as the Taoiseach has made clear, will be managed in a form that will protect the most vulnerable in our society and will minimise the impact on those who are dependent on crucial public services. We all have a role to play in the successful management of this difficult economic period. Compromises will have to be made, but we should keep the long-term view in mind at all times.

Our remarkable economic progress has not been reversed overnight. Talk of Ireland returning to the dark days of the 1980s, when emigration was rife and taxes high, is unhelpful and untrue. Our economy continues to be strong and dynamic. We have a very low level of public debt, which is down from 53% of GDP in 1998 to 25% at the end of 2007, that is 14% in net debt terms. We have very flexible markets, a low burden of taxation, and we have over 2 million people at work. Budget surpluses have been produced in ten of the past 11 years, so the Government's record speaks for itself.

Now is not the time for panic merchants to be espousing messages of negativity. Careful and sensible management of the economy over the last 11 years has positioned us well to weather the current economic downturn. The Government's policy has always been focused on improving the competitiveness of the Irish economy, and that is the most important issue that must be addressed. The indications are the next few years will require corrective action if we are to sail through the choppy waters we are experiencing. The Government will not resort to quick fixes. There will be no borrowing for the time being, no cutbacks in capital investment and no increase in taxes. Capital investment is still a priority for the Government. Prudent and intelligent management of the economy is what is required and is what will be delivered.

We can learn from others' experience. Germany regained its competitiveness over the past decade by containing wage growth and inflation, resulting in a boom in German exports. The Opposition is promoting policies reminiscent of the Italian experience. In Italy, wage settlements have not properly reflected economic realities in that country. Wage growth has been too rapid and, as a result, Italy's exports have performed poorly. Ireland needs to follow the German model rather than the Italian one.

I disagree with my colleague and good friend, Deputy Beverley Flynn, on the housing market. Making an intervention in the housing market by lowering stamp duty or other short-term measures will not solve its problems. The Japanese Government tried to prop up an ailing property market for years with the result that its recession lasted ten years. The housing market must be allowed to bottom out. It will be difficult, particularly with failures in the construction industry, but that is part of the economic cycle. For the Government to intervene and not allow the housing market bottom out would be a disaster. We must hold our nerve.

There will be people in difficulty but one of the sliver linings is that house prices will fall over the next six to 12 months. It gives an opportunity and incentive for first-time buyers to get on the market. I am equally confident the housing market will come back and the market will grow again.

We must all work together to ride through the economic turbulence we are experiencing. Our economy is one of the most robust in the EU and, thanks to prudent management, will be in a strong position to take advantage of any future upturns.

In my 26 years as a Member, there have been two defining moments in politics. The first was the policy pursued by the then Minister for Finance, Ray MacSharry, after the 1987 general election. He decided to stick to his guns and bring in the hard medicine. The second was the Tallaght strategy of Alan Dukes, then leader of Fine Gael, in which he decided, in the interest of the country, the only way forward was to control public expenditure. I hope we will see that type of responsibility from the current Opposition.

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