IF THE storm over taxation proposals is anything to go by, the harsh realities arising from fiscal dependency on the EU-IMF have not yet been fully recognised by Ministers, the opposition parties or the general public. National pride may be at stake here. But no benefit can be gained from an unfounded pretence. The sooner the consequences of a loss of economic sovereignty and the small print of our bailout terms are fully acknowledged, the more realistic people will become in their expectations.
Denial of unpalatable truths is nothing new. The road to our banking and building collapse was paved with irrational exuberance and wishful thinking. Even when the bottom fell out of government revenues and the horrendous cost of banking guarantees began to emerge, Fianna Fáil ministers remained in denial. It was only when the cost of borrowing to pay for public services became unsustainable, as Arthur Beesley detailed in this newspaper last week, that taoiseach Brian Cowen bowed to EU pressure and accepted the inevitable.
This Government came to office promising greater transparency in its decision-making. Part of that process involved the release of financial information in advance of the December budget. It was a small step forward but it remains a pale imitation of the pre-budget processes in some other EU states.
When a document outlining likely Irish tax measures became public in Germany, all hell broke loose. So it should have. Like nothing else, it exposed a general political ignorance of the terms of the bailout. It also reflected unnecessary secrecy in government, a failure to properly engage with the Dáil or to explain the dire implications of fiscal dependency to the public. In attempting to encourage spending and revive the economy, the size of the task that lies ahead should not be disguised. After all that has happened, the public deserves plain speaking, not political bromides.
Some progress has been made since the last government agreed to borrow €85 billion from the EU-IMF at a penal interest rate of 5.8 per cent. After some months of negotiation and rising pressure on the euro, the Fine Gael-Labour Party Government secured concessions worth about €800 million a year. Efforts to reduce the cost of nationalising Anglo Irish Bank were, however, rebuffed. Hand in hand with the loan went a four-year national recovery plan designed to disguise our fiscal dependency while delivering a correction of €15 billion in public spending.
The troika allowed the incoming Government some political flexibility on the understanding that any additional expenditure would be balanced by cutbacks. That limited room for manoeuvre has been built into a revised four-year plan, but the fiscal pain is likely to remain constant. In such circumstances, with borrowings of €1.25 billion a month to pay day-to-day bills, we are still in deep financial trouble.
Vested interests seeking special concessions should not be entertained. Protection of the most vulnerable will remain the most pressing requirement for the foreseeable future.