John Gerard Hanafin (Fianna Fail)

The necessity of the national recovery plan is self-evident. We have the lowest tax wedge within the EU and 45% of our people pay no tax at all. While we would all love to see this continue, in the current climate change is unavoidable. Over the last two years, there has been an 8% decrease in the cost of living; in real terms, even though there might be a small tax increase for people, in terms of their purchasing power they will be no worse off. That is significant. The same applies to those on fixed-income pensions and in paid employment. Our first concern must always be for those who, through no fault of their own, find themselves unemployed. One of the main tenets of the national recovery plan is that it provides hope. It points out that although GNP fell by 7.5% last year, there will be a modest increase this year. That increase of around 0.5% means that within one year there will have been an 8% swing.

Ireland is the third most globalised economy in the world. In fact, if we discount the city state of Singapore and the special administrative region of Hong Kong, Ireland as a nation is the most globalised economy in the world. As the world economy grows by 4% or 4.5% this year and next year, we will share disproportionately in that growth. Our corporation tax receipts are up in 2010 and our exports are already marching ahead. This will continue, and it will have knock-on effects throughout the economy. The retention of our 12.5% corporation tax rate, which is an essential advantage for us, along with our people and our high standard of education, is to be welcomed.

In recognising the positives, we must also recognise that there is a need for cuts, because the revenue stream has become significantly smaller. The gap must be bridged and we are doing this by facing our choices in the best possible way. The correction will consist of two thirds cuts and one third taxation. The cuts have been spread as evenly and fairly as possible. People on pensions will receive a cut, which is unavoidable, and those on State pensions will feel the brunt. However, we must recognise that over nine years the level of pay in the public service went up by four or five times the rate of inflation, and people are still significantly better off than they were in 2006.

What did we hope for from today's announcement? We hoped for a clear, balanced view that we would achieve sustainable targets. We are obliged, by our membership of the euro and the European economic and monetary union, to reduce the deficit to less than 3% of GDP, and I believe we will achieve this by 2014. We are front-loading the fiscal corrections despite whatever public concerns there may be and any resulting unpopularity. Despite the protestations of those who feel otherwise, the Government is taking tough decisions and it is taking them now. The first concern of this Government must be to restore the public finances and restore public trust. This is a major step in that direction.

I have always believed we would come through the recession, and I have always believed in the bigger plan. We are part of the eurozone, with a population of 500 million consumers who can buy our products, and we are part of a strong currency. I have no doubt there are those who wished, for whatever selfish reason, to prevent the success of the euro, and some of this perhaps stems from old prejudices. However, as we discussed in this Chamber before with Pat Cox, the euro is part of the light of the European Union. It is a wonderful experiment which should not fail, and we must ensure it does not.

We will start paying more in tax, as a percentage of our income, to meet the interest repayments on our loans, but that will fall by 2014. Although we will be paying more tax and taking on an extra burden, it will be for the short term. That extra burden of taxation stems from a situation in which we had one of the lowest debt-to-GDP ratios not only in Europe but in the world. At one stage, our net fiscal position was a 14% debt-to-GDP ratio. After this year's adjustments we will be at 90%, and by the end of 2014 we will be at 100%. There are many European countries that would love to be in that position. Many of them, before this recession ever took place, had a 100% debt-to-GDP ratio - that was in 2006-07. Even though we have faced considerable difficulties in our banking sector, our national finances were in good shape and we had the National Pensions Reserve Fund.

Do I believe the national recovery plan will help? The Opposition is engaging constructively with the Government on the plan, although if there were a change of Government it would alter certain aspects of it.

The fundamentals of this plan will not change and the amounts will not change. This nation has had a single focus in the past, particularly towards the difficulties in the North of Ireland, which appeared totally intractable and impossible. The saying was: "If you had the solution, you didn't understand the question." I know the Minister of State who is present played a leading role in bringing peace to the country and by doing so solved what was regarded as an intractable problem. We will get through our difficulties. While I am loath to use the phrase "The fundamentals are solid", our people are still well educated, willing to work and committed, and we have social cohesion.

We would do well to recognise that the unions may be protesting in Portugal - I hope it does not go further then that but the Portuguese Opposition has rowed in with support for the budgetary strategy there. It would be useful if it were to happen here in order that we can get on the road to the recovery that every party in this House wishes to achieve.