Taoiseach sees return to growth

Taoiseach Brian Cowen has said the economy is expected to grow in the second half of this year but warned that further cuts will be necessary to maintain stability in the State’s finances.

Mr Cowen said the Government spent last year working to stabilise the economy and get the public finances under control.

"There's still a long way to go, but I think 2010 and 2011 is about rebuilding the economy," he told RTÉ's This Week programme.

“We’ve come through a very difficult period … and now what Ireland has to do is reposition itself.”

He said costs have been reduced and competitiveness has been improved and stability has returned to the economy. “We’re very conscious of the fact that we’ve had to take some decisions which, in normal circumstances, you wouldn’t have to contemplate. But they were necessary, and I think there is a growing understanding that they were.”

“What we showed in the Budget was that by taking €4 billion out of expenditure we were indicating that what we said we’d do, was in fact what we did.”

The Taoiseach said, as a result of Government measures, the economy will return to growth towards the second half of this year.

But he warned that the structural deficit meant that there is still a gap between tax receipts and expenditure. “That means further cuts are provided for next year and in the following year.”

He said the 10.5 per cent reduction in GDP last year was “unprecedented”.

Mr Cowen also defended the Government’s support of the banks. He said the Government "acted on the best advice" to intervene and prevent an “implosion” in the financial sector.

To do nothing could have been “cataclysmic”, he said. “That was not to be contemplated.”

He said further recapitalisations would be undertaken “where appropriate” in the future. “But we intend retrieving that investment over time.”

The Taoiseach said Minister for Finance Brian Lenihan, who announced his decision to retain the portfolio despite his cancer diagnosis, continued to have the full support and confidence of every member of the Cabinet.

"He will continue discharging his duties based on his determination and our collective view that it is the right thing to do for the country," he said. "For so long as he wishes to do that, that will be the case."