COWEN STILL HAS A LOT TO DO BEFORE MOVING OFFICE - The news on the economy has been poor in the last few days - the publication of below par exchequer figures, a revision downwards of forecasts for our economic growth and this morning a prediction from FÁS that construction job losses will force the jobless rate in Ireland to hit 5.5% this year. Key business people are asking what can Finance Minister Brian Cowen do to perk up the economy before he moves office, and what kind of a portfolio is a new minister taking on in finance.
The economic advisor at the Irish Congress of Trade Unions, Paul Sweeney, says that Brian Cowen was a huge improvement on his predecessor Charlie McCreevy, who he says wasted vast amounts of public money on subsidies for wealthy investors. He points out that Mr Cowen finally abolished the huge tax subsidies, which amounted to €2 billion up to last year, and is taxing the blood stock industry this year. He also says that he is finally brought in a minimum tax rate of 20% on rich tax avoiders. However, Mr Sweeney says that the Finance Minister has just set up a new commission on taxation, which is totally biased against the public good and in favour, perhaps, of tax evaders again. He says the commission's terms of reference enshrines the low tax economy, and therefore, the low public services' ethos. The economist also says that Mr Cowen was slow to close the loophole on property developers and says he has allowed a lot of tax subsidies without any economic appraisal. He says this is costing ordinary tax payers a lot of money.
The economist at Irish Business and Employers Confederation, Danny McCoy, says that Brian Cowen, before he leaves the Finance Department, must keep the shape of the economy as it faces a domestic and international slowdown. He says the National Development Plan, which Mr Cowen brought in as finance minister, is a very good road map in trying to ensure that we are correctly positioned to take the upturn when it eventually comes. Mr McCoy says the Government must make sure that resources are in place to ensure that not just jobs are protected. The resources should ensure that individuals are able to take the new types of jobs that will emerge as the economy changes. He says there is no need for panic and adds that Ireland is entering the international economic downturn in a much stronger position that other countries.
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MORNING BRIEFS - The International Monetary Fund warned yesterday that potential losses from the credit crunch will reach almost a $1 trillion and could be even higher. The IMF says that losses are spreading from sub-prime mortgage assets to other sectors, like commercial property, consumer credit, and company debt. And it says that there was a 'collective failure' to appreciate the risky borrowing by financial institutions.
*** Alan Greenspan, a former Federal Reserve Chairman, says the US economy is in a recession, and that it would be appropriate to tap public funds to resolve the mortgage-related crisis that has helped pull the economy under.
*** According to minutes of their meeting in March, members of the Fed's policy-setting committee worried that housing and financial market stress could trigger a nasty slide in the economy.
*** FÁS says construction job losses will force the jobless rate this year to 5.5%. In its quarterly labour market report, the agency says this will rise to 6.6% next year. FÁS says that apprenticeships in construction have fallen by 50% since the beginning of the year.
*** A summer drive will be a luxury fewer Americans will indulge in this summer, as record petrol prices force US drivers off the road. The Department of Energy's Federal Energy Information Administration has projected that summer petrol demand will slide for the first time in 17 years as prices at the pump are expected to edge over $3.60 a gallon in June. This morning oil is at $105 a barrel.
*** A summer plane trip on the new Boeing Dreamliner is also out of the question as the plane builder is expected to announce the third delay to the 787. It is now expected to be delivered 14 months late.
*** On the currency markets this morning, the euro is trading at $1.5704 cents and 79.87 pence sterling.
