Jim Walsh (Fianna Fail)

I do not know why the Government would ask for suggestions from certain quarters because they seem to be bereft of any positive suggestions. I too could engage in partisan politics but the situation is far too serious and would serve no useful purpose.

As many Members have recognised, there is a global dimension to this economic problem. That is not to deny there are domestic problems as well. The entire banking system across the major western economies is in crisis. While it may have been building up for years, it has happened rapidly and was not recognised by many economic commentators, as Senator Joe O'Toole stated earlier.

In a report last week, Professor Roubini of New York University stated the US financial institutions could be facing losses to the tune of €3.6 trillion. His estimation was that if this turned out to be true, they would be effectively insolvent. Who would have ever thought the banking institutions of the number one economy in the world could reach this disastrous point.

In the neighbouring island, the UK Government had to inject €20 billion into the Royal Bank of Scotland. The bank has recorded a loss of €28 billion for 2008 and may well have to be nationalised to be salvaged. In the last quarter the German economy's output was reduced by 2.4%. We are in uncharted waters. No one in our lifetimes has seen such challenges.

Every village in the world is experiencing recession. Unemployment is rising in practically all our competing countries. However, this is no consolation to us. We have our own problems and, while we may look to certain international institutions or the EU for assistance, we ultimately have to address them ourselves.

Investor and consumer confidence is at an extremely low ebb but whether we are in Government, Opposition or the media, we all have a part to play as economic commentators to give a fair and objective account of our circumstances. I was told last week by a person from America who plays an important public service role in this country that even though the United States' economy is in deeper trouble than ours, the feelings of doom and gloom are much more pervasive here. We need to manage those feelings because the sooner we restore consumer confidence, the better. Unless we increase spending in the economy, unemployment will continue to grow. Unfortunately, unemployment will be a feature in all the major economies this and next year.

Suggestions have been made, although not by Fine Gael Members, regarding credit availability from banks. We can all provide anecdotal evidence that credit is not being made available. Efforts have been made to improve capitalisation and the policies of banks but perhaps it is also necessary to restore confidence in their lending policies. Our procurement policies should as much as possible assist small and medium enterprises. There should be less bureaucracy and fewer forms. In so far as small and medium enterprises are concerned, regulations and labour interventions in particular should be set aside for the present. I have learned of instances in my neck of the woods, which I know are being repeated throughout the country, whereby National Employment Rights Agency inspectors insist that restaurant staff are paid double time on Sundays. Apparently that is the law but it goes against the wishes of the employees and their employers who cannot afford the wage bill, and people are losing their jobs as a consequence. It is a ludicrous policy in the current climate. It was one matter to enforce these regulations in good economic times but we must now be pragmatic. I make the same argument about the minimum wage. Every obstacle to employment must be examined and possibly set aside.

Competitiveness is a major issue in terms of Exchequer borrowing. We may borrow as much as €20 billion this year unless corrective measures are taken. That is an unsustainable figure. There is no room for manoeuvre and there is no such thing, which I sometimes hear in the public service, as setting aside 80% of expenditure and considering only the remainder as discretionary spending. We have to consider our entire expenditure as discretionary.

Approximately €20 billion is paid on wages across the public service, of which we are part, and a further €20 billion on social welfare. It is my opinion that we need to cut €4 billion to €5 billion from the pay. That will not be done without pain. I have previously suggested that an immediate 10% cut should be made to the payroll of everyone in the public service without exception. The number of public servants also needs to be reduced by 15%. This can be done by means of career breaks or retirement. I acknowledge the many hardworking people employed in the public service who are indispensable to the system but, like every large organisation, a proportion of public servants are hiding or unproductive. We need to concentrate on identifying the latter. In any large organisation, money is spent unnecessarily and sometimes wastefully. It will not be easy to identify that waste but we must do so. The best people to assist us in this task are the middle managers who know how to address inefficiencies without impacting front-line services.

I recommend pay cuts over increasing pension contributions or taking other soft options such as borrowing for the national development plan because we are uncompetitive in our wages. A report conducted 12 months ago by the University of Glasgow on income levels in urban areas of western European economies put Ireland in first place at €44,300. Denmark was second at €36,200, which means we are 23% ahead. Britain was in seventh place, at €29,200. In other words, our average wage in urban areas is 52% higher than Britain's. The people who have bankrolled the EU since we joined, the west Germans, earned €32,300 in urban areas, or 38% less than here. These figures are not sustainable and unless we act now, wages in the private sector will be forced to fall further. I appeal to the unions to consider this issue before the problems become more serious in two years' time. We will not be able to afford these pay levels and others will be dictating to us the cuts we need to make.