Northern Ireland

Bad economic news in Republic 'unrelenting'

Euro notes and coins
Image caption Bad economic news has been unrelenting in the Repubilc

The Republic is three budgets and two years further down the road than Northern Ireland and the rest of the UK in dealing with the economic crisis.

There is, however, no end in sight to the pain.

This morning, north and south, people woke up, turned on their radios and quickly got depressed.

The bad economic news has been unrelenting, especially in the Republic.

Everybody south of the border knows that the December budget will be the first of three further tough budgets as the country struggles to get its annual budget deficit down to 3% by 2014 in line with the rules of the Eurozone and an agreement made with the European heads of government.

The Chancellor, George Osborne, wants to eliminate Britain's structural deficit by 2015.

Because of the Irish banking bail-outs it's estimated that the deficit is now over 30% but the government says that's all due to once-off figures, linked to the high cost of the bail-outs, and that the real underlying figure is about 12%.

It is only a few months ago, during the Greek public finance crisis, that the Republic was held up as the poster boy example for dealing quickly with economic problems.

But now the Labour Party at Westminster believes the Irish example shows the dangers of deflating an economy by taking money out of it too quickly.

And today the semi-official and independent think-tank, the Economic and Social Research Institute, also suggested that the 2014 deadline might be too short a time-frame and result in a lost decade.

That is a view shared by Sinn Fein and the Irish Congress of Trade Unions.

So, who is right?

Unlike the UK, the Republic as a member of the Eurzozone, cannot devalue its currency to gain a competitive exporting advantage and encourage economic growth.

It is also bound by the rules of the Eurozone and agreements it has reached.

But, perhaps importantly, the cost of Irish borrowing is now so high compared to that of both the UK and Germany that Dublin doesn't have much of a choice but to raise taxes and cut spending massively to reduce both the need to borrow and the cost of it.

There may be £4bn of pain in Northern Ireland but there's a black hole of over £13bn in the Republic's finances; that's the gap between money raised and spent and is just under half the country's annual tax-take.

The European authorities and an international credit ratings agency would like to see greater cooperation between the government and opposition parties in dealing with the crisis.

Indeed, Brussels is next month looking for detailed budget proposals for the next four years - a period during which there must be a general election.

This week all the main political parties met to discuss the issue and agreed with the principle of front-loading the pain and getting the deficit down to 3% by 2014.

But not surprisingly, with the opposition parties clamouring for a general election, there was no consensus on the detail of the necessary tax rises and spending cuts.

All of which brings us to another difference between the Republic and the UK; the British government has more of a mandate for its proposed cuts than its Irish counterpart.

Polls suggest the current government south of the border is extremely unpopular, largely because of its role in getting the country into its home-grown economic crisis in the first place.

Although the Republic has seen rising unemployment, pay cuts and tax rises, there have been no compulsory job losses in the public sector, and Irish social welfare compared to that in Britain, is still very generous.

So, many Irish civil servants were shocked at the proposed 490,000 job losses in the UK.

Perhaps far more worrying for them is the growing clamour among opinion formers and economists to scrap the Croke Park deal; that's an agreement reached between the unions and the government which said there would be no further pay cuts, or job losses, in return for greater flexibility in the public service.

At the moment the government appears unwilling to pull out of the deal, citing budget difficulties, but many believe it will have to.

For the Republic, though, the stakes are very high.

The country is, according to the opposition, fighting for its economic sovereignty.

Politicians don't want to follow the Greek example and have to resort to IMF and special European funds.

With an open economy Ireland, more so than the UK, is dependent on a global recovery to trade its way out of this crisis and improve its performance.

But there is a sense in Dublin, if not of panic, of time beginning to run out.

North and south the bad news on the radio isn't going away any time soon.