Cowen urges social partners to back recovery plan

THE SOCIAL partners must be involved in the Government's programme for economic recovery, Taoiseach Brian Cowen told the Dáil yesterday.

He said that the Government would set out a framework about economic renewal.

"We must involve social partners in ensuring the gap, which has emerged on foot of reduced tax revenues of €8 billion this year, will be addressed," the Taoiseach added.

"If we are to set up a credible timeframe in which it can be addressed, when set against the expenditure items on our books, we must work out together, in a collaborative way, how to bring back health to the public finance position."

Labour leader Eamon Gilmore said the Taoiseach and the Government did not know what they were doing regarding the banks. The Government's handling of the economic situation is downright incompetent at this stage, he added.

"Since the Taoiseach last answered leaders' questions in this House last Wednesday, there has been a succession of extraordinary developments in respect of the economy," Mr Gilmore added.

"The Minister for Finance told Deputy Joan Burton in the House last Thursday that the economy would shrink by 4 per cent next year.

"In an interview with Ursula Halligan last Friday night, the Minister said that the first the Government knew of the economic downturn was in July.'' However, said Mr Gilmore, people had been losing their jobs and businesses had been closing for the past year. Moreover, at the weekend, commentators suggested that unemployment would rise above 300,000, or 10 per cent, next year, and that 14,000 householders were three months or more behind with their mortgage repayments at present.

Fine Gael leader Enda Kenny said he was surprised to see the Minister for Finance announcing "that the Government was not aware of the extent of the economic tsunami coming to our shores until July, after which its members went away on their holidays". The Taoiseach replied that the Minister for Finance had not said that people were unaware of the overall state of the international economy until last June.

"The Minister was referring to the mid-term exchequer returns," said Mr Cowen. "On the emergence of these returns, the Government took action to ensure that expenditure would come in on target this year, as it has in broad terms."

Mr Gilmore said that they had a general statement of intent from the Government.

However, he added: "We need to hear some specifics from the Government. I understand perfectly why the statement on Sunday night was made, but it does not seem to have had the desired impact on the marketplace.''

Mr Cowen said the question of the health of a bank was not dictated solely by its price in the equity markets.

"The point is this: what is the capital in the bank and to what extent is it capable of dealing as an adequate ratio in respect of future impaired loans that may arise?" he added.

Mr Cowen said that there had been some banks in the past which had suggested they did not have any requirement for recapitalisation.

In recent weeks, he said, the Minister for Finance had met a number of banks and investment businesses on investment matters. All propositions were referred to the institutions themselves.

The question of how recapitalisation would proceed would depend on the proposals obtained by the Government. His job, he said, was to keep stability in the financial system.