FRONTLOADING CUTS 'EXACTLY THE WRONG THING TO DO'
27 Sep 2011
Congress General Secretary David Begg has warned that any attempt to 'frontload' austerity measures by increasing budget cuts would have "terrible consequences for jobs and choke off any prospect of growth."
Mr Begg said increased austerity was precisely the opposite of what Ireland needed and described 'frontloading' as "a nonsensical non-starter. It is exactly what we should not do at this point in time."
Delivering a public lecture on September at the National College of Ireland in Dublin, Mr Begg said that to allow room for growth less austerity was required. "The process of fiscal consolidation has to be significantly recalibrated and the period of adjustment extended until 2017.
"In addition, we need to be innovative about investment and divert monies from the National Pension Reserve Fund for 'high multiplier' infrastructure projects that deliver jobs and aid national competitiveness. These could include retrofitting of homes or a national broadband scheme. Private pension funds are also a source of potential investment.
"If we manage to create jobs, that will lift domestic demand and help to spur growth. And this is turn will contribute to the process of fiscal consolidation.
Mr Begg said the current austerity programme hurt wage earners and those on welfare to a far greater degree than those who derived income from profits or rents.
"This is a finding of fact from a recent study carried out by the IMF itself. It found that in a process of fiscal consolidation - as is being experienced in Ireland - wages fall by far more than rent or profits.
"The IMF study found that for every one percent of GDP of fiscal consolidation, wage income reduced by 0.9 per cent, while profits and rents fell by just 0.3 per cent," Mr Begg said.
"The essential unfairness of this process makes it untenable in the longer-term."
He said Europe as a whole needed to jettison the 'dogma of the market' if it was to have any hope of building a fairer future for all. In addition, Ireland had to devise an entirely new 'development model' as the current one had resulted in at least three serious crises in 60 years.
Mr Begg said Ireland should look towards the small, open economies of the Nordic countries for inspiration.
ends