Ahern wants EBR gone by 1999

EXCHEQUER borrowing must be completely eliminated by 1999, the year when monetary union is due to start, according to the Fianna Fail leader, Mr Bertie Ahern.

This is the only way to ensure that Ireland can meet the rules which will apply in monetary union, while leaving the Government enough scope to move to offset an economic downturn.

The Government is missing a major opportunity to use strong economic growth to cut borrowing, according to the Fianna Fail leader. Speaking to The Irish Times after a two-day party policy meeting, he said that "grave mistakes are being made," with the exchequer finances.

The relentless rise in spending - with day-to-day expenditure rising 20 per cent in the past three years - will be paid for in future, he believes, warning: "We are going to be in trouble, we are going to pay the price."

Fianna Fail is putting a final shape on the policies it will put before the electorate, after intensive discussions in its seminar in Malahide, Co Dublin.

The party has been strongly critical of the Government's record on public expenditure, which paid, according to Mr Ahern "scant attention to forward planning as if they know they will not be in power to deal with the consequences.

Questioned on the strong rate of spending growth under the previous Fianna Fail-led Governments, Mr Ahern said that much of this was due to the carry-over of public pay deals postponed in the late 1980s.

If returned to Government, the party would take a tough approach to spending, he said, probably setting a clear rule limiting spending as a percentage of national output.

The current administration's approach to spending has not worked, as Ministers see the limit of 2 per cent real growth as a base from which to bargain for higher allocations, meaning the target is broken each year. But comparing this year's spending with last is no measure of efficiency, he said.

What is needed, he argues, is a new approach looking at the effectiveness of spending across all areas of all departments, rather than just a gradual bargaining upwards each year.

Mr Ahern sees the elimination of borrowing as an essential preparation for monetary union. An absolute cap of 3 per cent of borrowing would be put on members of EMU and, if the Government was to have any flexibility to adjust to an economic downturn once in monetary union, then we must start from a strong position. Eliminating borrowing would mean capping the level of the national debt, he said, and continuing its fall as a percentage of national output.

Following close examination of the issue, Mr Ahern answers with a firm "yes" when asked if Ireland should join monetary union if Britain stays out. He accepts that sterling's swings will challenge policy-makers, but says there are many pluses to the single currency. "It will lower transaction costs and eliminate barriers," he argues, while staying out would also carry problems, including deterring inward investment.

Ireland's trade patterns have changed, he said, and the key growth areas for the future would be the other markets likely to be in monetary union, he said.