My mate Jonny came up with the idea that we all give up a week’s earnings to put the country back on its feet and that we then get on with life. It seemed a reasonable proposition; there is so much gloom and doom in the air that giving up a week’s pay to get rid of it would not be a bad deal. But would a week cover it?
The CIA World Factbook gives the figure for Ireland’s Gross Domestic Product in 2008 as $285 billion, a figure that equates to €224 billion at the current exchange rates. The economy is undergoing what some politicians call “negative growth”, i.e, it’s shrinking. There will be less money spent and earned in 2009 than there was in 2008, the European Commission said in January that the economy would contract by 5% this year. Instead of there being GDP of €224 billion, the Commission is suggesting that the figure will be €213 billion.
Against that total, the Government seems to be anticipating a gap of €18 billion between what it takes in and what it lays out, so if one divides a Government deficit of €18 billion by the GDP of €213 billion one gets a figure of 0.084 or 8.4%, in other words the deficit is approximately one twelfth of our annual income. Jonny’s suggestion of one week’s earnings would have provided only 2 per cent of annual income; in order to cover the deficit, just for this year, it would take a month of the country’s income.
The Taoiseach set out such figures back in January, in his own words,
However our considered assessment is that, in the absence of appropriate further measures, a General Government Deficit of between 11 and 12 per cent of GDP would be in prospect for each year up to 2013. This is not sustainable and urgent measures are now required to start the process of fiscal stabilisation.
Earlier this month the Minister for Finance published a five year fiscal consolidation programme which sets out how we will progressively reduce the level of Exchequer borrowing over the next five years in order to reduce the General Government Deficit to below 3% by 2013. This will involve a combination of expenditure and taxation measures over the period.
We have also indicated that a credible start in 2009 requires a further adjustment of €2 billion and we are committed to making decisions to achieve that adjustment.
The alarming thing is that the 11%-12% he was projecting would equate to a deficit of €25-€26 billion. Jonny would have to hand over six weeks pay, and that would only cover the shortfall.
The EU rules state that the deficit should not exceed 3%, which means with a GDP of €213 billion our deficit should not be more than around €12 billion for the year. The heavy-handed attempt by the Government to recover just €2 billion has provoked huge unrest; what is going to happen when it tries to recover perhaps €6 billion?
There seems no-one who will stand up and call things as they are.
I thought about texting Jonny about going for a pint, but then remembered even that is out – it’s Lent.