'Battered' Irish economy will shrink 10 percent by 2010
The Irish prime minister said that the contraction ‘is likely to represent the beginning of an adjustment that will see a reduction of up to 10 percent in national income over the 2008-10 period -- a scale of decline that is without precedent here in Ireland and with few international parallels."
Dublin -- The Irish economy will have shrunk by up to 10 percent between 2008 and 2010, a rate of contraction "without precedent" for Ireland, Prime Minister Brian Cowen told parliament on Wednesday.
"The economy contracted by close to two percent last year and this is likely to represent the beginning of an adjustment that will see a reduction of up to 10 percent in national income over the 2008-10 period -- a scale of decline that is without precedent here in Ireland and with few international parallels," Cowen told lawmakers.
"Ireland is being battered by international storms the like of which this generation has never seen," he added in a stark assessment of the eurozone member nation.
Cowen told lawmakers at the start of a two-day debate on the economy that, as a regional economy accounting for around 1.8 percent of eurozone output, Ireland is "particularly exposed" to the international financial downturn.
"The scale of the economic challenge which we in Ireland face is clear. It is evident in the distressing rise in the number of people becoming unemployed."
He said there was a prospect of further job losses of more than 100,000 by next year.
"It is evident in the downturn in economic activity and the associated sharp reduction in exchequer revenue. It is clear from the crisis in the banking sector and the associated difficulties in securing access to credit on a consistent basis and at competitive rates.
"It is also evident from the global spread of the crisis, and the uncertainty about its likely depth and duration," added Cowen.
The prime minister also said that the unexpectedly rapid collapse of activity in the construction sector in Ireland, the crisis in the international financial and banking system, the sharp appreciation in the value of the euro especially against sterling and the decline in demand in export markets had all "impacted severely" on the economy.
Cowen's coalition government is in talks with the social partners -- employers, unions and farmers who negotiate national wage agreements -- in an effort to achieve consensus on how to save two billion euros (2.675 billion dollars) in public spending this year as a first step in efforts to stabilise the national finances over five years.
Opposition leaders have been complaining about lack of detail about the government's plans to deal with the crisis.
Cowen said that in the absence of corrective measures, a general government deficit of between 11 and 12 percent of GDP (gross domestic product) would be in prospect for each year up to 2013.
"This is not sustainable and urgent measures are now required to start the process of fiscal stabilisation."
He said the government planned to progressively reduce the level of exchequer borrowing over the next five years to reduce the general government deficit to below three percent by 2013.
"This will involve a combination of expenditure and taxation measures over the period," Cowen pointed out.
He said savings of two billion euros this year was a "credible start" but only the first phase in the process.
"Further adjustments of the order of 15 billion euros will be required for the five year period as a whole."
Ireland entered recession during the first half of 2008, becoming the first eurozone nation to do so, after it declared negative economic growth in the first and second quarters of 2008.
The country has been hammered by the international financial downturn, a domestic property market slump, a banking crisis, decade-high unemployment and the worst retail sales figures in 25 years.
Ireland's economy was known as the Celtic Tiger during the 1990s when double-digit growth placed it among the richest nations in Europe.