ECONOMIST SAYS FOUR YEAR PLAN WILL DRIVE ECONOMY TO THE FLOOR -
European Commissioner for Economics and Monetary Affairs Olli Rehn said last night that taking the necessary structural measures should pay off in the medium term, but Ireland needs to be ready to take more action if necessary. Ireland is targeting spending cuts and tax hikes totalling €6 billion next year. That is 40% of the €15 billion in adjustments planned between now and 2014 - but some analysts have questioned the projections they are based on.
One of them is Tom O'Connor, an economist at Cork Institute of Technology. He says he does not support the four year plan because the markets do not support it and he predicts it will do nothing to bring down the current high interest rates Ireland is being charged on the bonds markets. He says the plan is unworkable because it will drive the Irish economy to the floor, causing unemployment to grow and increasing industrial unrest. He says the IMF is being touted as the big stick with which to beat Ireland.
He says that instead of the the Government's current plan of action, it should tell the European Commission it needs an extension of two years to get the country's deficit in order and should also stimulate the economy with a €6 billion stimulus package which will drive up economic growth and improve our public finances over two years. The economist says the markets will not be fooled by the visit of Commissioner Rehn. He says the visit is more of a political back-slapping exercise than anything else. He says Ireland is being used to patch up the euro zone's growth and stability pact and says we should not sacrifice our economic independence for this.
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MORNING BRIEFS - The Financial Times reports the Olli Rehn urged Irish political parties to put their differences aside and support the fiscal consolidation effort. The newspaper says his comments, at the start of a two-day visit to Dublin ahead of publication of the government's four-year fiscal plan, reflect concern in Brussels that the weakened Fianna Fail-led government may fail to secure parliamentary backing for next month's crucial austerity budget.
*** Reuters reports that EU Economics Commissioner Olli Rehn said he had not discussed any need for a European Union bailout with Ireland, adding he believed market confidence would be restored once the country published its four-year plan to cut debt.
*** Bloomberg says the Commissioner indicated that Ireland may have to abandon the tax policies that helped foster a decade-long economic boom, reiterating that the country couldn't continue as a 'low-tax' economy.
*** The BBC says Commissioner Rehn said confidence would be restored once the country published the four-year plan to cut debts. It says his visit is being seen as an effort to convince markets that Ireland does not need a Greece-style bailout.
*** DCC results for the first six months of its financial year show sales of €3.9 billion, operating profit of €67.9m and profit before tax up by 17% at €60m.
*** In a trading update this morning, building materials group CRH says the rate of decline in group sales has moderated during recent months, with like-for-like third quarter sales down 4% compared to last year. This follows a 10% like-for-like fall recorded for the first half of the year, and brings the cumulative rate of decline in underlying sales to 8% for the nine months to the end of September.
*** On the currency markets the euro is trading at $1.3872 cents and 85.99 pence sterling.
