Michael McGrath (Cork South Central, Fianna Fail)

I welcome the opportunity to speak in favour of the Government amendment to the motion before us. We are now in a changed economic world. What has happened in global financial markets in recent weeks is without precedent in modern history. The proposed $700 billion rescue package for the financial institutions in the US is ten times what our public expenditure, current and capital, is likely to be in 2008. The state of health of the global financial markets is directly linked to the strength of the US financial institutions, so it is in all of our interests that stability is restored to these institutions as quickly as possible.

As a small open economy, the fortunes of the Irish economy are inextricably linked to the global economy. When I was studying economics in college, companies like Lehman Brothers, Merrill Lynch, Bear Stearns and AIG, were world leaders in their field. Today, Lehman Brothers is no more, AIG has been rescued by the US Government, Bank of America has taken over Merrill Lynch and Bear Stearns has merged with JP Morgan. Events such as these would have been unthinkable just a few short months ago. The bottom line is that there are no certainties anymore either for the global economy or for the Irish economy.

However, unlike many of our European neighbours, we have entered this so-called "economic perfect storm" in a comparatively good position. As a country, we have come through a period of remarkable economic growth. No one can question that as a country we have made tremendous strides on the back of the economic boom of the past decade or so. The Ireland of 2008 bears no resemblance to the Ireland of the 1980s, despite what some commentators and even politicians might wish to portray. Contrary to the Opposition motion before us today, it is clear that fruits of this boom have been put to good use.

We have seen a dramatic reduction in the national debt as a percentage of our economic output. The Government has established a pensions reserve fund to provide for future pension liabilities. We significantly increased investment in public services with more gardaí, teachers, and health professionals than ever in the country's history. In addition, we have rolled out an enormous programme of capital investment to improve the country's infrastructure. However, that is not to underestimate the challenge before us, which is immense. We can exercise no influence over some of the determinants of our economic performance. Exchange rates which have been unfavourable for exports with the weak sterling and US dollar, interest rates now set by the ECB, and oil and commodity prices, to name but a few, are all important instruments outside our control.

At a time when all the external factors are unfavourable, it is even more important that we manage well those factors under our control. Public sector pay and private sector pay to a lesser extent must be kept under control. I congratulate the Government and social partners on achieving a draft national wage agreement in recent weeks. I hope the various unions will support the draft agreement so that it can be implemented. We can control our taxation policy and the parameters of public expenditure. I welcome the Minister's commitment, which he reiterated last night, to weed out any examples of inefficient spending and poor value for money in the public sector. The recently published report of the Comptroller and Auditor General highlighted a number of such incidents that must be addressed urgently. It is important that we also continue to pursue a strategy of managing inflationary pressures in our economy.

The Government has taken control of the situation and has made a number of important decisions in recent weeks. Savings of €440 million are being implemented up to the end of this year, which only represents a start. The deposit guarantee scheme has been increased to 100% up to a value of €100,000 to restore confidence in the banking sector. This decision was essential in recent days when considerable uncertainty had emerged in the media regarding the stability of the banks and the Minister acted decisively and underlined the strong capital base and liquidity of the Irish banking system which is quite distinct from the US system in terms of the retail banks here. Most important of all, budget day has been brought forward to 14 October.

The next three weeks provide the Opposition with a glorious opportunity to present a full budget as an alternative to the Government's. It should flesh out the details and show us its proposed expenditure, the areas it would cut and the areas it would prioritise. The budget next month will undoubtedly prove to be one of the most difficult that any Government has had to introduce in recent years. Difficult decisions will need to be made and we cannot be all things to all people. Public expenditure will need to be seriously restrained. While we have a low debt to GDP ratio that allows us to borrow for capital purposes, it is an unsustainable position for any Government to borrow to cover current expenditure. I am sure the Minister will ensure we do not pursue such a course of action. I am sure there will be a number of initiatives to stimulate the economy.

Agencies that are not performing or whose functions are unclear or overlap with others should be sacrificed. It is my view that much of the work performed by agencies should be brought back into Departments under direct ministerial control. The primacy of Government and the elected Member should be restored in our democracy, and this is the time to do it. The public now have an appetite for reform. They know that unpalatable decisions will be taken and sacrifices will need to be made, and I believe they will support the Government in the steps that will need to be taken.

We need to place even more emphasis on entrepreneurs and start-up businesses, with the formation of a specific business start-up incentive package. The types of incentives could include an exemption from local authority rates for a two-year period, a discount on electricity and energy supply for a defined period, and greater assistance in achieving compliance with revenue and regulatory requirements.

It is important that the State would treat people who have lost their jobs in recent weeks compassionately and that every arm of the State would make every possible effort to support them in their hour of need. I have full confidence that the Minister, Deputy Brian Lenihan, has the ability and the courage to introduce the measures required in the next budget. On this side of the House, he will have our full support.

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