Enda Kenny (Mayo, Fine Gael)
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The Taoiseach will this morning have seen the verdict by Standard & Poors' on the Government's handling of the economy, and its analysis was damning. It argued that even were the global economy to improve in 2010, Ireland would be left behind because of a seriously damaged banking system and a calamitous loss of competitiveness over the past five years. As a result, it states there will be little or no growth in the economy before 2012. Effectively, Ireland has been demoted from the first division of European economies.

This obviously will mean credit shortages, insurance indebtedness and that it will be impossible, from this perspective, to export our way out of this recession. I have been informed that this downgrade could cost €200 million this year and somewhere between €400 million and €1 billion next year. What is the Government's assessment of the cost of the downgrade by Standard & Poor's? Has the NTMA provided its analysis or verdict to the Government on the cost of this downgrading?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Minister for Finance and his Department have not yet had an opportunity to inform the Government of that cost. However, I note the announcement by the rating agency Standard & Poors that it is revising its rating of Ireland from AAA to AA+. In considering this, one also should bear in mind the following key points. Ireland is not unique in this regard as a number of other countries have had their credit ratings revised recently. A range of factors, both domestic and international, influence the ratings that countries attract. While we recognise that we have challenges, particularly in the public finances and our banking system, the Government has taken considered and deliberate action to help stabilise and bring sustainability to the public finances for some time. That will be further evidenced in next week's budget.

Ireland is currently experiencing a significant contraction in economic growth and it is expected that we will grow above trend once world growth resumes. After a long number of years running surpluses, the Government will have to run deficits for the next number of years. A sizeable part of the deficit relates to the very substantial public investment capital programme we continue to pursue. While there is considerable pressure on the public finances, we should recall that we are coming at this from a position of relative strength given our relatively low public debt burden. While it will rise over the next few years, our debt levels should be at projected EU averages. Many of the factors that facilitated Ireland's economic success in recent years still remain. The NTMA has already successfully raised significant sums on international markets this year.

Regarding the banking situation, we have continued to take a strategic approach regarding the State guarantee, the recapitalisation policy and risk assessment is being actively considered by the Minister.

Enda Kenny (Mayo, Fine Gael)
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If the sum is to be €500 million, that will be 1,000 gardaí, 1,000 teachers and 200 schools. I assume the Government has made some analysis of what this will cost. The Taoiseach says there will be some evidence of changes to the banking structure in the budget next week. Our belief is that the Government could have acted more swiftly and decisively in this matter. Arising from that, what was the cost to the Government of the advice of Merrill Lynch? Has that been taken into account or is the evidence given to the Government shoved aside in respect of what Mr. Peter Bacon says about a bad bank for toxic debt?

When does the Taoiseach expect world trends to resume? He made the point that Ireland will be able to get back on top when world trends resume. Does the Taoiseach have a timescale for that? What actions is the Government taking to ensure the country will be competitive, which it lost in the past five years, to avail of it?

I refer to the comment made by the analyst of Standard & Poors, which is not a comment from Fine Gael or the Labour Party, to the effect that when it looks at the Government through the financial institutions, it trusts neither. The analyst made the point that the probability is that a change of faces behind the Cabinet table is needed to restore trust, integrity and confidence in the Irish financial institutions and the Irish Government. The €500 million question is what is the Taoiseach's view of that. Does he share the analysis of the analyst, whose words can change the market overnight, that there is no confidence in the Irish Government, that the Taoiseach has failed to deal with the economic challenges of the country, that he has presided over a disastrous banking system, that we have had a calamitous loss of competitiveness and that the Taoiseach should go?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have no comment on the gentleman from the credit rating agency other than to note that his job concerns credit rating. I do not know what he knows about Irish politics or what the choices are.

Paul Kehoe (Wexford, Fine Gael)
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He must know something.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The important point is that the Government has reacted in the face of a deteriorating financial situation——

Pádraic McCormack (Galway West, Fine Gael)
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But never acted.

Brian Cowen (Laois-Offaly, Fianna Fail)
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——last July, in the October budget and in February. Very little support was available from all sides of the House. We continue to do this and will do so again next week. There is broad agreement in respect of economic discussions that have taken place and a recognition that a structural deficit of the order of 8% has emerged in the public finance position. Over the next five years we must deal with that and satisfy the European Commission regarding the Stability and Growth Pact parameters and requirements regarding the deficit being reduced to 3%. That represents a major challenge for the economy and this House. The Minister for Finance will indicate his plans next week, specifically on how we will deal with the remainder of this year and looking to 2010 and 2011.

Regarding the question on when the upturn will come in the world economy, nobody can give a definitive timescale for that. There are indications, perhaps on the optimistic side, that towards the end of this year the green shoots of recovery may emerge in the US economy. It is too early to say how effective the stimulus plan implemented by the Obama Administration will be. The G20 meeting in London this week is an important event in that it will hopefully see a measure of international co-ordination with regard to how we can deal with this international financial crisis and get a greater degree of transparency into the financial system that would provide confidence.

In our domestic effort, we will continue to examine the next steps for the banking situation. These are not decisions that could have been taken some months ago. They can only happen on the basis of due diligence and expert advice provided to the Minister and the Department by the NTMA, the Central Bank and others. That deliberation continues.

Joan Burton (Dublin West, Labour)
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We are now two days away from the publication of the Exchequer returns for the first quarter of the year. We were surprised that, for the February returns, the Taoiseach and the Government were not watching the trends. Is the Taoiseach examining the trends for the outturn for March? Last Thursday, the Minister for Finance, Deputy Lenihan, told the Opposition finance spokespersons that he expected tax receipts to amount to €34 billion. When the Taoiseach appeared on RTE on Sunday night, he referred to returning to the figures of 2002 and 2003. The tax receipts for 2003 were €32 billion. Did we lose €2 billion over four days? It seems an awful lot of money to lose over four days. With respect, is this not one of the problems for the ratings agencies? This Government keeps chopping and changing the figures. There is grave uncertainty about what it is doing about the banks.

What is the target for the general Government deficit? The Taoiseach said repeatedly that it was 9.5% but now says that the target for the structural deficit appeared to be 8%. The Taoiseach will recall that the Minister for Agriculture and Food referred to €6 billion, while others in Government talked about €4.5 billion. Uncertainty in business is the hardest thing to price. The continued uncertainty of the Taoiseach and his Government is partly what is driving the rating agencies to take such a negative view of Ireland. Has the Taoiseach reached a view on what he is seeking to address in terms of the general Government deficit next Tuesday? Is it 8% or is it €4.5 billion? How much of it will be recovered by way of tax increases and how much will be recovered through expenditure cuts? Has the Taoiseach decided on these figures yet?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Budgets are prepared and deliberated upon but they are announced on budget day, not the week beforehand. I did not mention any figures when I spoke last Sunday.

Joan Burton (Dublin West, Labour)
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The Taoiseach mentioned years.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I did not mention any figures. I was simply trying to convey to the correspondents who attended the briefing the scale of the issues we were dealing with and conveying those to the public in a way that was not technical. It was about saying we have seen a gap arise in the public finance position which means our spend and taxation levels vary between 2009, 2003 and 2004 levels. That is a four or five year period and I was making the point that the correction would occur over four or five years. I was seeking to convey that while the scale and magnitude of the problem is of that order, we have the next four to five years to correct it. It was not something that would be resolved in year one, two or three but over a longer period.

I also made the point — I will make it again so it will not be misinterpreted — that the structural deficit I spoke of is 8%, which is what is regarded by most as the structural deficit in our public finance position at the moment. That seems to be a point of common agreement among us. It is therefore necessary to address the structural deficit in the first instance. There is a cyclical part of the deficit and as I hope growth will return during those five years, we will see a pick-up in our revenue position because the cycle will move into positive territory vis À vis where it is currently.

I was simply seeking to convey the thinking behind the Government's position and the scale of the problem, thinking about how one could convey to people in ordinary language the size of the issue and over what period of time we can expect to resolve it. I also indicated why we should have some confidence about resolving the matter over that period, as we have those five years to make up the five-year deficit that has emerged in recent times. The budget details will be announced by the Minister next Tuesday on the basis of finalised decisions.

Joan Burton (Dublin West, Labour)
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Has the Taoiseach at this stage examined the Exchequer trends for the quarter to the end of March, the results of which we will have in two days? It would seem very odd if the Taoiseach did not do what the proprietor of any business would; if there are cash flow difficulties or if one is in a hard situation, the person would sit on the receipts on a week by week basis and monitor trends closely. That is what every business person in the country must do, along with many households, with regard to budgets. They must watch what money is coming in and on the basis of that decide what can be spent.

In the RTE interview, the Taoiseach referred to the years 2002 and 2003, when our tax revenues were €29 billion and €32 billion respectively. The Taoiseach did not speak casually so is there information about the trends? In that context, has the Government priced in the cost of higher interest as a result of the negative rating by Standard & Poor's? My understanding of the drop in rating from AAA to AA+ by the rating agency would probably cost us an average of half a percentage point. Depending on how much the Government decides to borrow — we will not know this until the budget — the cost this year could be up to €500 million and it could be double that for the whole of next year. Has the Taoiseach had the opportunity to price in the Standard & Poor's action?

I listened with some astonishment to the gentleman from Standard & Poor's commenting on the composition of the Irish Government. That is not any business of a foreign rating agency. I am one of the people who for the last two years, together with the Party of European Socialists, has called for rating agencies to be reformed but the Taoiseach's former colleague, Commissioner McCreevy, has consistently refused to entertain such reform.

These guys boosted everything on the way up but are negative about everything on the way down. They have some factors relevant to this country wrong and we have more better prospects than the agency acknowledges. As the rating agencies are not subject to supervision, we are as a country unfortunately at their mercy. The Taoiseach may discuss that with his colleague in Brussels, Commissioner McCreevy, who has taken the very high-handed attitude that controlling rating agencies would be bad for international markets and capitalism.

What are the trends arising from the Exchequer receipts? Has the Government priced in the downgrade by Standard and Poor's and will the Taoiseach have a conversation with his colleague about reforming the rating agencies so that all countries get a fair deal from them?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Commissioner is in the business of acting on credit rating agencies with regard to conflicts of interest or anything that arises in the work they do and the forecasts they make.

Emmet Stagg (Kildare North, Labour)
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It will be a light-handed approach.

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is incorrect to say that Commissioner McCreevy is indifferent to the role they play. I am sure the opinions are given in a professional manner but I know that the credit rating agency issue has been taken up by the Commissioner. I suggest that member states, the Council and ECOFIN must step up to the plate in this matter in as much as there is a role played by the Commissioner or the Commission.

The Deputy raised a number of issues and I am trying to recall them. On the budgetary position, the Government has been working in a very focused way to measure the adverse impact various options may have and come forward with a proposal which we believe will be in the right interests of the country given the fragility of the economy this year and going forward to meet our objectives in controlling the borrowing requirement up to 2013. Getting the agreed timeline with the EU Commission over five years rather than four has been helpful in that respect.

I have been indicating for some time that there is a need for us to take those factors into account. As I have stated, the structural and cyclical side of the deficit is a helpful way of explaining what Ireland needs to do in a way that will be credible and helpful to us internationally. The National Treasury Management Agency has been in a position to raise large sums of money through bonds during the course of the first quarter of the year and I have every reason to believe that this can continue.

On the end of March Exchequer returns, when I was asked about this before I stated that one finds out the full picture at the end of the month. As the Deputy is aware, in the last week or number of days, amounts are still coming in, particularly relating to VAT and other subheads. I was making that point.

The end of March Exchequer returns will be published on Thursday and although they are not yet available, indications are that the decline in tax receipts evident in January and February has continued into March. I have also stated that the tax revenues this year, in the absence of corrective action, would be some €3 billion less than forecast in January and as put forward by the Minister for Finance.

The Government is committed to restoring order to the public finances by bringing the deficit below the 3% limit by 2013, which is the agreed timeline with the European Commission. The supplementary budget to be presented next week will set out the multi-annual strategy in that regard.