Brendan Smith (Cavan-Monaghan, Fianna Fail)

As we are aware, there has been a significant deterioration in economic conditions, and especially in the public finances in the past twelve months. This deterioration in economic conditions has had a significant impact on the economy. The economy contracted in 2008 and will continue to do so this year. A major factor weighing on activity is the correction in the property sector and this has exerted a negative drag on overall economic activity. This has spread to other sectors of the economy with retail sales falling sharply. This, in turn, has had negative implications for employment levels, and the pace at which numbers on the live register had increased is especially worrying. The substantial loss in economic output has resulted in a steep fall in tax revenue. The tax shortfall in 2008 alone was €8.1 billion.

Compounding our domestic economic problems, there has been a major deterioration in the global economic environment. The origins of this can be traced back to developments in the market for USA sub-prime mortgage debt, in which difficulties began to emerge during 2007. What started as a major disruption to the operation of a specific credit market has spread to global financial markets, intensifying over time, and culminating in severe global financial problems. Internationally, the impact of financial market turmoil has been to reduce access to credit and to weigh on confidence, pushing the major world economies into recession. The eurozone countries, the United Kingdom, the USA and Japan are all at the verge of, or are in, recession.

The deterioration in the international climate has weighed on our ability to achieve a suitable rate of economic growth. Exports are the life-blood of a small, open economy such as ours. The record appreciation of the euro against sterling has had a major negative impact in this regard. While our exposure to the United Kingdom economy is not as intense as it once was, I recognise the pain experienced by Irish exporters, especially food exporters, at this time. The Government is implementing a range of policies to support our competitiveness objectives, aimed at improving competition in product markets. These include major investment in research and development. In addition, the Government is maintaining capital investment at twice the EU average. This policy has both short-term and long-term benefits, supporting jobs and improving competitiveness and productivity in the longer term.

As a result of the dramatic changes in the international economic situation, the Irish fiscal outlook in the coming years will be considerably more difficult than anyone could have envisaged. Restoring sustainability to the public finances can only realistically be done over a period of adjustment of up to five years. Given the scale of the emerging position, taking action over a shorter period of time would impose substantial economic and social costs and would be neither sensible nor appropriate. The Government has agreed to put in place a five-year plan to restore balance to the public finances by 2013.

To achieve this plan, we must work together. The farming pillar has been part of the social partnership process since its inception in 1987. It has been through good and bad times during the course of the seven agreements put in place in the past 22 years. A return to the spirit of agreement that prevailed in the first partnership agreement, namely, the Programme for National Recovery, is now called for. That agreement was put in place at one of the most difficult economic times for the country with high taxation, record levels of unemployment, punitive interest rates and poor public finances.

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