Peter Power (Limerick East, Fianna Fail)

I very much welcome this debate in Dáil Éireann.

It is hard to think of many debates in Dáil Éireann which have assumed greater importance than the debate we are having today and tomorrow. What needs to emerge from all parties, irrespective of our differences, is a clear pathway which has credibility and can be executed with confidence.

Firstly, I want to put on the record of the House my absolute conviction that we, as a nation, have the wherewithal to deal with all of our own issues, independently and without outside intervention. I, for one, am tired of the complete sense of defeatism, which is propagated throughout the media on even an hourly basis, when any sense of objectivity or impartiality has been long since abandoned, even by former respected pillars of the Irish media.

There is another reason I welcome this debate, that is, that it provides us with an opportunity to have a real contest of ideas between the Government parties and the Opposition. The politics of being against everything and for nothing are over. The fact is that it is decision time now and hard choices need to be made.

Nobody is asking for the Opposition to set out exactly where every cut should be made and where every euro of tax will be imposed, but rather to set out a macro-economic position which has real credibility and is capable of execution, whether we agree with it or not. That said, I welcome the Opposition's firm commitment to the target of cutting the deficit to GDP ratio to 3% by 2014.

For those outside the House who do not subscribe to this target, I would say the following. First, it is simply not credible at this stage, when every other European country has agreed, to abandon the 3% target by 2014. This is a simple issue of credibility which is not negotiable.

Second, to abandon that target now would, not alone close the bond markets to Ireland in the new year but, effectively, close off any opportunity for foreign direct investment. We should remember that even in the midst of an extremely difficult recession, Ireland still remains perhaps the most highly attractive place for global companies to do business. Unless we send the clearest of clear messages that we will credibly address our budget deficit issues, global investors will simply not invest here. I would appeal to those who suggest that there is an easier longer way of doing it to reflect on the reality of the position in which we find ourselves.

As a nation and as a people, we must stand up, be totally honest and state that we are serious about this business. My own view is that if the crisis is tackled head on and take much of the pain up front, then the burden will lighten over the four years of the programme. The opposite is also true. If we take the easy option at the outset, the burden will get increasingly difficult over the latter years of this programme.

I accept others hold a radically different view. They state that this programme should be suspended or expanded out over for another three or four years. That has no basis in reality and flies in the face of the position in which we find ourselves.

It is not as if we are in unknown territory here. One may draw direct comparisons between the perilous state of the public finances in the mid to late 1980s and where we are now. At one stage in the 1980s our debt to GDP ratio stood at 129%. We are nowhere near that figure now, and yet within a relatively few short years we brought the situation under control and below the 60% debt to GNP ration in the Stability and Growth Pact guidelines. If we adopt fair, but tough, and equally-spread policies, we can achieve that success again.

Equally, the public and business particularly will respond if we demonstrate in the clearest possible way that we are serious about this. If there is a clear pathway towards getting our own house in order, it will provide a major injection of confidence into the economy, both in terms of inward investment on which we rely so much in these times and also in terms of indigenous business.

The simple reality confronting the country is not so much the extent of the adjustment which needs to be made, although that will undoubtedly be profound, but rather the message we wish to send to those who invest in Ireland and those from whom we borrow, that we have a clear understanding of the nature, size, magnitude and scale of the problem and the measures necessary to correct it, and then, most importantly, to execute those measures with decisiveness and authority.

The question of whether to front-load out not to front-load the fiscal adjustment has been much discussed in the media in recent days. I am firmly of the view that we need to front-load this adjustment and made bigger corrections at the outset of this path of economic recovery. As I mentioned, our own economic history in the 1980s proves this to be the best way of doing so. More importantly, not to do so at this time would be to take a risk in terms of the global confidence in this country. It is my strong conviction that this would be an unacceptable risk for a Government of any colour to take, and the initial correction needs to be in the region of a reduction to 10% in the deficit to GDP ratio.

Having said that, it is also my view that if we take sharp corrective action in the short term, the fundamentals, which have caused so many problems for us, for example, in the banking system, the bond market and the world economy, and which cost us so much on a weekly basis, will being to stabilise and improve. In these circumstances, we could easily foresee a lessening of the load in the latter part of the plan, in other words, much can be gained by taking very decisive action now.

In my view each party needs to set out, over the coming two weeks, how this front-loading should be done. As this is a macro economic debate, no party should be asked - it would it be realistic to do so - to set out exactly where they would make cuts on a Department-by- Department basis.

However, it is vital for each party to set out its position in four broad areas: first, the extent to which it would cut capital expenditure; second, the extent to which it would cut current expenditure; third, revenue raising and taxation; and fourth, which is linked to the third one, pro-growth policies which promote increased revenue. In this respect, I have a real issue of the Fine Gael position and I have been critical of it. The Fine Gael leader has consistently ruled out tax increases. His finance spokesman has consistently stated that the capital budget will be protected. That can only leave the bulk of adjustment to be made on the current expenditure side, in areas such as health, education and welfare which make up by far the biggest proportion of Government spending.

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