THE GOVERNMENT is preparing to respond to the slowdown in the economy before the Dáil rises for the summer with a package of measures designed to curb public spending in the second half of the year.
Both Taoiseach Brian Cowen and Minister for Finance Brian Lenihan yesterday acknowledged the seriousness of the economic situation following the publication of a report by the Economic and Social Research Institute (ESRI) that warned the country was slipping into recession.
Responding to questions from Opposition leaders in the Dáil, the Taoiseach accepted economic growth this year would fall short of the predictions made a few months ago and action would have to be taken.
"We, as Government, must address that situation. We must work within the budgetary parameters we have set out and set a course for a budgetary strategy that will be sustainable," Mr Cowen told Fine Gael leader Enda Kenny.
Mr Cowen said that dealing with a lower-than-expected growth rate was a challenge, but he added that the Government would deal with it on the basis of taking the correct course now so that growth in the economy could resume when the upturn came.
"This involves making a temporary adjustment now to avoid permanent damage. This will be done by the Government in the context of the upcoming budget, estimates and our plans for next year," said Mr Cowen.
The Taoiseach refused to be drawn on whether action would be taken in the short-term.
But Mr Lenihan hinted that the Government's response would be announced soon after the half-year figures for Government income and expenditure were officially known next week.
"The crucial figures for us will come out next Wednesday, when we have our mid-term revenue receipts, when we know what we've got in our own bank this year at the Department of Finance. Then we will be in a position to decide what action we need to take," Mr Lenihan said on RTÉ's News at One.
"If we're to take action we have to start taking action now, because the reality is that you cannot reposition spending for 2009 unless you start taking action in 2008.
"I've made it clear that I will discuss these matters with my colleagues and that the Government will take resolute, prudent and determined action to deal with the position that has arisen," Mr Lenihan said.
While the Minister refused to be drawn on whether the Government would consider a public-sector wage freeze, he said that there would be discussion with the social partners about the difficulties facing the country that everybody would have to reflect on.
The director of policy for the employer's group Ibec, Danny McCoy, in an article in today's Irish Times, says that rising unemployment was already giving rise to wage restraint in the private sector, and this pay restraint would also have to be reflected in the job-secure public sector.
Mr Kenny accused the Taoiseach of being in a state of denial on the recession facing the economy for refusing to offer any tangible Government response to a problem that has been developing over the past six months.
"Under Brian Cowen's management, we have gone from boom to bust with the first recession for 25 years. Thanks to the ESRI, we now know that the current Taoiseach was neither qualified nor able to manage the economy," said Mr Kenny.
Labour leader Eamon Gilmore also maintained that the Taoiseach had to accept responsibility for the recession and said that people now needed to know how he proposed to take the country out of it.
"To date, the Taoiseach has not given me a sense of where he is going with it, nor confidence that he knows where he is going with it, and the sooner he can give us the steer, confidence and assuredness that, having led us into a recession, he has some handle on how to lead us out of it, the better," said Mr Gilmore.