Taoiseach says Government did not choose 'soft options'

PRESS CONFERENCE:TAOISEACH BRIAN Cowen has rejected the contention that the Government chose "soft options" in yesterday's Budget by placing a greater reliance on tax increases than on cuts in public spending.

Mr Cowen said over the past nine months the Government had announced cumulative public spending cuts of €4.8 billion for 2009, compared to tax increases that amount to €3.7 billion.

He and Minister for Finance Brian Lenihan said imposing tax increases was unavoidable and there were no realistic alternatives to close the gap in the public finances.

“The scale of the crisis is such that we need to raise revenue as well as making cuts. I do not agree that we have taken soft options,” said Mr Cowen.

Mr Lenihan said he had decided to make public the €80-90 billion evaluation on the total exposure of Irish financial institutions to distressed loans to correct a number of inaccurate reports that suggest exposure levels of €400 billion and higher.

He said the establishment of the National Asset Management Agency would restore banks as the “engines of credit” in society.

The Minister would not say how much the State would pay for the toxic assets, but said it would provide good value for taxpayers. Borrowers would be pursued vigorously and told to pay up.

Emphasising the immediacy of this process, he argued that banks would otherwise continue in “paralysis”.

Mr Cowen and Mr Lenihan were speaking at a post-Budget press conference at Government Buildings yesterday, attended by all 15 members of the Cabinet and the Minister of State for Children Barry Andrews.

The post-Budget press conference is normally taken by the Minister for Finance. Government sources said this week that the gravity of the economic crisis warranted the presence of Mr Cowen and the entire Cabinet in a show of unity.

Mr Lenihan accepted it was a tough budget but said it was both fair and progressive. “Those who have most are required to pay most in this Budget. But everybody has to pay something.

“Fairness is very difficult to adjudicate on. The Government considered this long and hard. At the end of the day, fairness means you cannot shuffle off responsibility to somebody else. You do have to make a contribution, no matter how small, if you have a stake in this country.”

Mr Cowen said the Budget was the first steps in a process to address the structural elements of the deficit over a period of years. “We have to change the way we operate as a country and we cannot let it sap our confidence. This recession will pass and the world will recover. The consensus is that the world economy will recover in 2010. That will bring a return of growth in Ireland in 2011.”

When questioned about the decision to set up an agency to take over the toxic assets of Irish banks, Mr Lenihan said: “It was very important to put the book value on record. You see in many international journals inaccurate references to Irish exposures of over €400 billion.”

The strategy of Government was to cleanse the balance sheets of banks by acquiring their assets at a discount. “We believe it will be a good deal for the taxpayer. In relation to the banks, we believe that the banks must take those losses now.”