Business Opinion: For much of this year the Government has been playing down the extent to which problems were emerging in the economy writes John McManus.

The Taoiseach himself entered the public debate in no uncertain terms on at least two occasions, First telling the ICTU congress in Donegal over the summer that the economists then predicting tough times ahead had been getting it wrong for years (before going on to make his infamous gaffe to the effect that they should commit suicide if they really believed their own warnings).

The second recorded occasion was at the Fianna Fáil parliamentary party gathering at Druids Glen in September where he told colleagues that "there is no place for politically motivated attempts to talk down the economy".

Not surprisingly the Government has toned down this sort of rhetoric as the predicted economic storm clouds duly materialised and no doubt the issue has been well and truly laid to rest by the Pre-Budget White Paper released over the weekend.

It made for grim reading. Tax will undershoot targets by something in the region of €1.75 billion this year and the budgetary position will be every bit as tight as even the most pessimistic of economists was predicting. Perhaps even more alarming is that the tax projections for next year - which form part of the Budget arithmetic - indicate that the economy could slow to a standstill.

The doomsayers could be forgiven for indulging in an orgy of self congratulation and I-told-you-so, But it's debatable as to whether they are really entitled to do so. In truth nobody foresaw the full extent of the downturn which was amplified by the turmoil in the markets.

But one thing is certain, however, and that is that the slowdown is real and not something that we have talked ourselves into because we ignored the Taoiseach's warnings on loose talk.

And the forecast is bad. Last Thursday the governor of the Bank of England did not mince his words, telling the Treasury Select Committee that UK inflation was on the rise and growth was slowing.

His pessimism was echoed by the chairman of the Federal Reserve Ben Bernanke who warned a group of US businessman of a high degree of uncertainty in the US economic outlook and his worries that strains in financial markets may lead to broader problems.

Speaking earlier in the week, out own John Hurley, governor of the Central Bank, spoke in a similar vein about the risks of the problems in the market spilling over into the wider economy.

What is interesting about all this is the conundrum it raises for the Government and for Minister for Finance Brian Cowen as he frames his Budget. Given the scale of the juggling act that confronts him on Wednesday the Minister in not likely to spend much time trying to reconcile the Taoiseach's bullish rhetoric with the fiscal realities, but the gulf between the two does in a way sum up the dilemma he faces.

Many of the Taoiseach's arguments of the summer remain intact. To be fair to him he never pretended that the economy was not facing into a rough period - his point was that it was not going to be anything like as bad as some were predicting.

The pre-Budget figures released this weekend may undermine this argument a little bit more, but the case can still be made that the economy remains fundamentally strong. Indeed, John Hurley tempered his warning last week by pointing out that the fundamentals of the economy are good, noting that employment growth was boosting household incomes while corporate balance sheets remain healthy.

And if you believe that, then the argument for taking the brakes off next Wednesday and pumping some money into the economy start to make some sense. Most of the doomsayers would appear to be of this view, with a strong consensus amongst economists that Cowen should not be afraid to let borrowing increase and run a deficit as the price for getting the economy over what they believe to be a short term hump as the property market returns to some semblance of normality. Again there is consensus as to where this money should be spent, with continued investment in infrastructure, modest tax cuts and stamp duty reform seen as the key targets.

Following their advice would require an act of considerable political courage. It would also be Cowen's chance to put his stamp on a economy that he has been accused of little more than babysitting for the last three years.