There have been a number of reports in today’s media that the Irish economy has grown by 1.3%. Although this is no bad thing, as it will help to rebuild the confidence of working people, the real picture is somewhat more complicated than the headlines might indicate on the first examination. Certainly any economic perspective that doesn’t make a sober assessment taking into account everything that is happening in Europe and particularly Greece just now will not stand up to much challenge.

Even a closer examination of the figures reveals some issues. Firstly the headline figure is that Gross Domestic Product has risen by 1.3% in the first Quarter of 2011. But the figure for Gross National Product shows a fall of 4.3% over the same period. The difference in the figures lies in the fact that GDP includes the profits of foreign multinationals which are based in Ireland. The lower figure for Gross National Product reflects the effects of the austerity measures introduced over the last couple of years which have cut the market and the effects of government cuts also. The situation in the Building industry is particularly bleak with seasonally adjusted production down by 15%. There are now some 200,000 less building workers in the state than was the case at the height of the Celtic Tiger boom years. This is an extremely significant figure since it has been estimated that the construction industry represented some 25% of the economy at that time.

The instability in the state finances has big implications for the public sector. It also has big implications potentially for the banking sector, especially if Noonan’s proposals to pass on losses to “senior bond holders” were implemented. The cost of bailing out the banks has now risen to around 30+% of GDP, this looks set to rise following recent stress tests on the banks. The knock on effects of more instability and crisis in the Irish banks , on top of what has already taken place, with the black hole of NAMA and AIB in particular, will pose further risks to the capacity of the new coalition to raise money on the international bond markets as is planned for 2012.

It’ll take more than fractional economic growth to solve the funding crisis facing the government. Tax revenue is very fragile and even if the economy was to take off tomorrow it’s probable that unemployment would still tend to remain high. Unemployment tends to be a “lagging economic indicator”. The situation in the building industry reflects the problems in the economy. While there are Ghost Estates on the outskirts of many towns and villages across the land and while no one is buying the existing new houses, what incentive is there to build more?

The problems in the rest of the euro zone will place enormous pressures on the FG/Labour coalition to continue and extend the austerity programmes. Already Noonan’s remarks about forcing the “Senior Bond Holders” to take “a haircut” seems to have put the wind up not only the speculators, but the rest of the government also, with An Tánaiste back tracking in the Dáil the next day. The ECB and the IMF are calling the shots and that opens up a dangerous period for the working class. To re-enter the bond markets the government needs to try and avoid being at the wrong end of the bond market. Otherwise, as before, they will merely be picked off by the parasitic speculators. Now more than ever we need a fighting and democratic trade union movement with a clear sighted leadership. Reliance on social partnership is not going to solve the problems, the pressures on the Croke Park agreement illustrate this very well. There is very little room for the trade union leaders to manoeuvre within. Sooner or later they will come into conflict with the coalition.