Michael Moynihan (Cork North West, Fianna Fail)

I welcome the opportunity to contribute to the debate that is taking place now in every corner of this country. We speak about the dire economic circumstances in which we find ourselves, the pathway we must put in place and the proper foundation to build for the future of our country.

A number of speakers have said the world is facing one of the greatest crises since the 1929 Wall Street crash and the subsequent Great Depression. All the graphs world economists produce show us that the figures of today are proportionate to those pertaining in that period of the late 1920s and early 1930s. Many similarities can be seen between the lead up to that crash and elements in the world economy today.

Our current considerable difficulties concern our public finances, our trading and our trading partners. This is particularly the case because we are an open economy that exports 80% of our products into markets in the UK, Europe and the United States. These countries are all in recession and are pulling back from exporting. As many speakers have noted, confidence has gone from the economy. People are not confident. They think ten or 15 times before they spend money. Prior to this our difficulty, especially during the latter years of the Celtic tiger, was that people spent money without too much thought. That may be a side issue but economies have contracted and confidence has gone from the world economy. How can we ensure there is confidence in our economy in the future?

We must set a number of matters straight and the most important of these is to get our public finances in order and ensure they remain so, permanently. Other matters relate to the banks. Many commentators, economists and, indeed, ordinary people have been disgusted, frightened and shocked by many of the events that have taken place throughout the banking industry. Many of these related to the implementation of regulation and the question remains whether principle-based regulation is strong and concise enough to ensure compliance In many countries regulation went down the same road as ours and the real difficulty lay in separating the regulator from the Central Bank and putting in a new regulatory framework. Ordinary people had a sense that somebody was watching the house because there was a regulatory system and they saw the media commenting on the Financial Regulator regulating the banking system. The Celtic tiger purred on and credit was freely available in our economy but we know now that this was not the case.

As we try to get our economy back on track, a great number of people have mentioned the importance of getting more credit flowing freely within the economy and making more money available to small and medium sized businesses. There is a need to get money and credit in place because there is a significant squeeze in respect of overdraft and other facilities that financial houses across the country are making available to small and medium sized businesses. However, there is also a need to ensure that the reckless lending practised by certain financial institutions, especially in the Anglo-Saxon world — Ireland, the UK and the United States — will never again be allowed to happen. Many people have said this is the first time the situation has disintegrated but I have stated on many occasions that it is not the first time. It has happened before.

The credit squeeze is having a detrimental effect. Heretofore, the agricultural industry was one of the pillars we could always rely on in times of recession. The dairy industry is under fierce pressure at present, especially the Irish Dairy Board which has acted almost as a financier for the industry across the country. The banks are now squeezing available credit even though product is being sold through the board and co-ops around the country, particularly the smaller ones, have been able to access their accounts, at whatever stage. Now the banks and other financial institutions are squeezing them. The Minister should be very concerned about this. Discussions are ongoing but the dairy industry is a significant and vital one and prices for milk and milk products are hugely deflated around the world, causing enormous pressure to these people. There must be freedom of credit here. The situation arises directly from the credit crunch, the mismanagement of the financial institutions and the lack of proper and accountable regulatory framework.

We must remember those economies, particularly during the 1930s, that tried to balance their books and took so much from the economy they almost killed it. There is a creeping return to the protectionist policies that were pursued in the Great Depression. Given the strength of the European Union of which we are so solidly a member, that will be stopped but we must be mindful not to go towards such a regime and must continue to work and trade in global markets, try to build up our trade and make sure we have the markets.

Concerning research and development in our country, we must be very innovative as we go into the future and new ideas must be thought out. It was grand when the Celtic tiger roared and everything turned to money but we must have new ideas now and new vision to go forward and ensure there is a sustainable market for the product we are building and for all we can create in this country. We have always been a very innovative nation and have been to the fore in ideas and we must ensure we give people an opportunity with training and grants for research and development.

As we face this budget, and because of the difficulties that have occurred, particularly during the past six or seven months, many people have cited as factors the global economy and downturn. It is true that we face the biggest financial crisis in the world economy since the late 1920s and early 1930s. Those are the facts of the matter. We are a small open economy trading into those dire financial situations and we must have the resilience and the leadership to go forward.

Last week we saw the new US President give a reception and warm welcome to the Irish nation. We must go back to the very strengths that created the Celtic tiger in the first place and the expansionist policies we had in the 1960s and onwards. We must return to those strengths and rekindle what we have. We have a very well-educated workforce that is ready to participate and an education system that has benefited us considerably.

A number of measures should be taken to get our fundamentals right. The first is to have our financial system in order. The one we had did our reputation untold damage in the world economy. We must have concern about that. We have to ensure our research and development are to the forefront and that we have new and innovative ideas. I would be concerned about the issues affecting the agricultural industry, particularly the dairy industry. There are significant difficulties caused by the financiers, the banks and the dairy board which need to be examined. Credit must be made available for co-operatives in order that they can draw down against their products. The tough measures in the budget should be as fair as possible to all society.

See this speech in context