THE GOVERNMENT should try to cut more than €3.6 billion from the deficit this year in an effort to put “clear blue water” between Ireland and other financially troubled euro states, Peter Sutherland said yesterday.
In an address to the Institute of International and European Affairs in Dublin, the Goldman Sachs International chairman and former attorney general said there was space for “augmenting” or “tweaking” the course already being taken under the terms of Ireland’s bailout.
He also called for a new “rules-based” system to secure the future of the euro and the common market, which he considered “inextricably linked”. This would not lead to tax harmonisation, according to Mr Sutherland, who has also served as a European commissioner and inaugural director general of the World Trade Organisation.
“We in Ireland have a brief opportunity now to put clear blue water between ourselves and others and perhaps to surprise the markets with the demonstration of our resolve,” he said.
He added that he agreed with the conclusion of ECB executive board member Jürgen Stark’s conclusion that the Government should capitalise on improving market sentiment towards Ireland by “front-loading” budgetary cuts.
Mr Stark, who has tendered his resignation from the ECB, told The Irish Times earlier this month that public-sector pay should be cut in the forthcoming budget.
“Much of what he said seems to me to have more than a germ of truth in it,” said Mr Sutherland yesterday, although he stopped short of singling out public-sector workers for pay reductions.
He did, however, urge the Government to take on “vested interests” such as trade unions and the professions.
He declined to specify how much more than €3.6 billion should be removed from the economy but highlighted the potential benefit in making a “dramatic and uncalled-for affirmation” of a desire to solve the problem. “This is a very dangerous time and it would be foolhardy not to recognise that and build on the market reaction that is already evident.”
He acknowledged that imposing additional cuts on an already weary population would need to be done carefully to avoid depressing domestic demand.
He said he believed that, if managed properly, it would deliver an “upside to confidence” that would in turn “free up resources that are remaining metaphorically under beds”.
Mr Sutherland said “the next period of weeks will be of great importance for the euro,” but he did not agree with fears that the euro was “doomed”.
However, he did accept that the euro was facing into a period of potential “political accidents”, such as a failure to give effect to an increase in the European Financial Stability Fund’s resources or a Greek default.
In the future, there should be greater oversight of and influence over national euro economies and budgets, with member states required to include a “balanced budget” provision in their constitutions, he said.
“None of this, in my view, requires tax harmonisation,” said Mr Sutherland, describing as “extremely regrettable” France’s attempt earlier this year to link the interest rate on Ireland’s bailout loan to corporation tax.
