Martin Mansergh (Tipperary South, Fianna Fail)

This budget has been prepared against a background of very weak international economic and financial conditions and deterioration in domestic demand and the public finances. It sets out the Government's plan for the renewal of our economy over the next five years which can be built on to secure sustainable economic progress for the long term.

Arising from the deterioration in global financial market conditions, the world economy is experiencing its deepest and most widespread recession for more than 50 years. Global economic output is contracting for the first time in this period with world trade forecast to fall. The advanced global economies, Ireland's major trading partners, are forecast to contract by more than 3% this year, which will in turn affect our export performance. As a small, open economy reliant on trade, other external factors such as an unfavourable sterling exchange rate are unhelpful for our indigenous exporters and are heightening competitiveness concerns in that sector.

Domestically, as the recession which commenced during 2008 deepens further, gross domestic product, GDP, is projected to experience its sharpest decline on record, contracting by almost 8% this year. While a further decline is likely in 2010, as the expected international recovery gains momentum and the sharp shock in residential housing output abates, Ireland's economy should begin to grow again by 2011. In the meantime, we must vigorously pursue appropriate policies to position the economy to benefit from the global recovery whenever it emerges. Our labour force continues to be highly skilled and adaptable and we continue to invest in education at all levels to ensure we have the skills demanded by our increasingly knowledge-intensive economy. Our economy remains flexible and resilient and this will facilitate an adjustment to reflect the prevailing conditions.

For its part, the Government remains committed to providing a pro-enterprise environment and to maintaining our relatively low tax burden on business. In the budget, capital spending remains at a high level by international standards. This will allow us to maintain our investment in productive infrastructure, which will enhance our competitiveness. These measures will help equip the economy with the requisite skills and operating environment needed to participate in future sustainable, export-led growth. Through taking the necessary action now, we will safeguard our recent progress and secure our future prospects.

In his budget, the Minister for Finance set out the essential steps needed to restore and renew this economy. The urgent priority is to stabilise the public finances. The resolute actions being taken in this budget, especially to reduce the budget deficit, are fundamental to restoring the confidence of investors in our economy. We also must do the following: restore our damaged banking system to ensure credit flows to consumers and businesses; regain competitiveness, since the future of our economy lies in exports——