Although Fianna Fáil government and their voters (along with the government-appointed Financial Regulator) deserve the blame for the financial crisis in Ireland, I must reluctantly admit that Fianna Fáil are probably the best choice to tackle the critical problems now faced by the state. Their determination to push through the pensions levy was needed in the face of fierce opposition. It is unlikely that another party would be prepared to take the necessary action without a strong mandate from the electorate.

A major flaw, however, is that Fianna Fáil do not lead by example. People on low or middle incomes will resist any cuts unless they feel that all sectors of society are hit and not just them. The privileged should be faced with severe cuts – especially the well paid banking executives and the bank directors that conveniently retired over the last few months with a windfall golden handshake and lucrative pension. Politicians and government ministers should accept particularly heavy cuts to their salary. People who exploit tax-avoidance loopholes should be brought into the fold, and, above all, tax evaders should be prosecuted. If this does not take place, the government will be faced not only with an end to social partnership, but also social unrest on the streets of the capital.

While the pensions levy is only a start, it does send the right signals that the rapidly worsening fiscal problems are being taken seriously and are being responded to. The best case scenario can only be achieved if difficult measures are taken to make a swift adjustment, however, it would still involve a severe economic contraction. If the action taken is inadequate, however, national bankrupcy may be inevitable. A consequential rescue by our European Union partners or the IMF would come with unwelcome strings attached, in addition to even tougher budget cuts and tax increases. A sharp downward adjustment in prices, spending, lifestyles and expectations cannot be avoided – we can only try to manage the adjustment to minimise the pain inflicted.

The high levels of public sector pay and an over-staffed civil service is something from an era of exuberance. During difficult economic times it is a major drain on the exchequer finances. The pensions levy partially addresses this, however, a likely rise in bad debts on the banks’ balance sheets (now guaranteed by the taxpayer) would undo all the efforts so far. More fat needs to be cut. The Health Service Executive springs to mind, however, not a single hospital bed (and corresponding staff & resources) should be cut until all idle middle management, unnecessary expenditure and pointless bureaucracy have been eliminated. Any wasted expenditure identified by the Comptroller and Auditor General should be ruthlessly eliminated.

The spiralling deficit is also due to the collapsing tax take. Ireland has quite a narrow tax base and this is now proving to be a major disadvantage. The tax base should be broadened. Perhaps a property tax (at least on those with two or more properties) would be a first step in the right direction. No longer should property be an untouchable asset class for speculators. As for corporation tax, it would be rather difficult to increase that. Ireland has nurtured a vast swathe of foreign direct investment from US companies that suckle at the nipple of predatory corporate taxation. They are not easily weaned without the risk of capital flight of a more fundamental nature. Our low tax, low public services society has created an unfortunate dependency on fickle foreign investment.

The good news is that, luckily, Ireland entered the crisis with relatively healthy public finances including low government debt, so there is some scope for borrowing to cover the deficit in the short term. The bad news is that it will be very difficult for Ireland to successfully raise the billions needed to the plug the hole in the public finances by selling government bonds. As so many “developed” countries will also be looking to the markets to finance their budget deficits more or less simultaneously, the markets will demand high interest rates to buy the (now relatively risky) Irish bonds. This is why the spending cuts (including public sector pay) will have to be all the more stringent.

I do regret the unjust nature of the cuts such as the pensions levy that uniformly hits all without considering pay levels. It only reinforces the profound inequality that exists in modern Ireland. We should remember, however, that equality is not what Fianna Fáil and their cronies have come to represent. Let them clean up the mess they created – afterall, they know best where the dirt lies. A time will come when the green shoots of recovery finally beckon us to close the chapter on a reckless gold rush and place our trust in new leaders. Hopefully, a more just society will be waiting for us when we re-emerge on the other side – with a different government. For now, however, we must choose the bitter pill that only Fianna Fáil can deliver.