Extend time to reduce deficit

DAVID BEGG:REDUCING THE deficit to 3 per cent by 2014 cannot be achieved without permanent damage to the fabric of society, said the general secretary of the Irish Congress of Trade Unions, David Begg.

He said both targets were arbitrary ones and called for the time period to be extended to seven years.

“The truth is that Government is delusional about the effects of the fiscal crisis on growth. But markets can assess the reality. That is why, after three brutal budgets, the cost of borrowing has risen rather than fallen.”

He quoted the Financial Times on whether Ireland had gone too far with austerity at the expense of growth.

The external circumstances to the current crisis in the public finances are different to what they were in 1987, Mr Begg said. A repeat of the 1987 approach was “doomed to failure”.

He said Peter Sutherland of Goldman Sachs has recently lent his considerable influence to the objective of a four-year austerity programme, citing the way the cutbacks of the 1980s had been followed by economic growth.

But that had occurred against a backdrop of two currency devaluations and the introduction of the Single European Market. Circumstances are very different today.

The International Monetary Fund had recently questioned the idea that cutbacks could lead to economic growth, Mr Begg said.