Taoiseach Brian Cowen said today the Government would have to close the gap in the public finances through cutting expenditures and broadening the tax base over time. He said the National Development Plan (NDP) would not go ahead as currently envisaged and that the Government would be making final arrangements for the recapitalisation of the country's main banks over the next few days.
Speaking on RTÉ radio this morning, Mr Cowen defended the Government's record over recent years, saying it had reduced the country's foreign debt and he insisted that Ireland was now in a better place than many other countries to deal with the current financial crisis.
However, Mr Cowen said the National Development Plan would not go ahead as currently envisaged as it was dependent on a projected annual growth rate of 4 per cent. Instead, he said targetted expenditure would see investment placed in higher education, research and development in order to develop a 'smart economy'.
"You have to target limited resources to areas in most need," he said.
Mr Cowen's comments come the day after Fine Gael leader Enda Kenny called on the Government to scrap the NDP, claiming that the targets were "unachievable" in the current economic climate.
Speaking on the Marian Finucane show today, Mr Cowen admitted that the country was going through a difficult period.
He said: "In some cases things will get worse before they get better" and acknowledged that some businesses would not come through the recession.
"We have to work together but we also have to make decisions that won't be painless".
When asked about the expected recapitalisation of the country's main banks, Mr Cowen said: "This has been a very quick turnaround and we have to make a quick adjustment."
He said the Government would be finalising arrangements for the recapitalisation of the Irish banking sector in the coming days.
"We're trying to keep this economy going - to keep as many jobs in the economy as we can - we cannot do it without a banking system," the Taoiseach said.
Mr Cowen said that had the Government allowed the collapse of Anglo Irish Bank, it would have caused "an awful lot of damage to us and would have an effect on the wider financial system in this country".
The Taoiseach said the recapitalisation of the two main banks was necessary to "provide confidence externally that these are two good banks".
Mr Cowen said there were governance issues in the country's banks which are currently being investigated but under that the terms of the recapitalisation the Government, he said, "would be putting more directors in there and will have more voting rights."
He said the Government needed a committment that the banks would maintain credit lines to Irish businesses.
In reference to the Lisbon Treaty, the Taoiseach said recent events highlighted the importance of being in the European Union.
"The importance of being in the European Union is critical to this country's fortunes and survival because the European Central Bank has the capacity and resource way beyond what our own central bank would be," he said.
"People see what the unfortunate people of Iceland have had to deal with when trying to deal with a financial crisis of this magnitude and scale on the basis of trying to defend their own currency."
"I was in a Cabinet back in '92 and '93 when we had the Irish pound being attacked by speculators and investors and you saw interest rates going up to 100 per cent overnight," Mr Cowen said.
"What people need to understand is that Europe isn't about crooked bananas and the size of sausage rolls. Europe is fundamental to how this country can operate in the future and I hope that that lesson of interconnectedness is being brought home to us in a very real way now," he concluded.
