Joan Burton (Dublin West, Labour)

The Cabinet will make the budget decisions and will have to live with their consequences. Nobody can have any sympathy for the plight of this Cabinet. Members should read the report by Messrs Regling and Watson. Mr. Regling is now the man with the money in the stabilisation fund. He said that our problems were "home-grown". He has laid out the scale of the policy errors of the years since 2000, particularly the property tax shelters that drove the construction boom and the light touch regulation that encouraged the reckless lending practices of the banks. We know the impact of the Government's fiscal tightening will be to depress growth in the coming years. What we do not know yet is whether the country's credit rating internationally will be more affected by the evidence of weakening activity or by the stubbornly high level of the budget deficit. This is why it is a balancing act.

Portugal does not have anything like our fiscal problems, does not have a banking problem at all and has a forecast deficit for next year of below 5%. Why can it not borrow at reasonable rates and why is its borrowing limited? It is because it cannot show enough growth prospects in its economy.

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