Taoiseach predicts economy will improve this year

TAOISEACH BRIAN Cowen has predicted the economy will show a marked improvement this year, having survived 2009, which he described…

TAOISEACH BRIAN Cowen has predicted the economy will show a marked improvement this year, having survived 2009, which he described as the “most difficult year in Irish economic history”.

Mr Cowen said the economy was now poised to move to the next phase and that it would return to growth in the second half of 2010.

In an extended interview on the This Week programme on RTÉ Radio 1, he accepted there was still a long way to go before the crisis was resolved and that more cuts would be required.

In addition, banks would also require further injections of capital from the taxpayer, he confirmed, but he did not specify the sums needed.

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The Government had focused during 2009, said Mr Cowen, on “stabilising the economy and dealing with the public finances. There is still a long way to go.

“I think that 2010 and 2011 is about rebuilding the economy. We have come through a very difficult period, a financial and economic crisis that we have not seen for many decades globally.” Ireland needed to continue repositioning itself, by reducing costs and improving competitiveness, he said, conceding that it resulted in a fall in the standard of living. He pointed out that the cost of living had also dropped, softening the impact for some people.

The Taoiseach also defended the Government’s decision to give a blanket guarantee on deposits in Irish financial institutions, saying the costs to the country would have been much higher if it had not done so.

“The idea that you would do nothing and let it all collapse. That is just cataclysmic. You would not even think about that. That is not an option,” he said.

Mr Cowen also denied the collapse of the banks could be attributable to Government, although he accepted there were failures in the regulatory system and in corporate governance.

He also stood over his term as minister for finance. “When we were there, we had growth and employment and investment. There was excessive lending. Nobody suggested that we were going to have an international implosion of the whole financial system,” he said.

He acknowledged that there would be additional costs, indicating the nationalised Anglo Irish Bank, but also other institutions. “There will be costs. There are costs not just for that bank but for other banks. “It will require further investment by Government on the part of the taxpayer for the purpose of making sure that our economy recovers,” he said.

Mr Cowen rejected extending the timeframe for the banking inquiry to cover the months following the Government guarantee in September 2008.

“The purpose of inquiry is to look into the background of this problem. Government has taken responsibility for all the decisions since then,” he said.

Asked about his reaction to Brian Lenihan’s cancer diagnosis, Mr Cowen said. “He is a friend and colleague of mine. I am very proud of the fact that I put him in the position that I did.”

He added that Mr Lenihan would continue to serve in the role “based on his determination and our collective view that it’s the right thing to do for the country and he’s in a position to do that”.

Separately, Government chief whip Pat Carey said last night the Government was considering setting up an independent panel of experts, some drawn from outside the State, to conduct one of the scoping inquiries into the banking crisis. Mr Lenihan will outline the intended framework for both inquiries in the Dáil tomorrow.