Get ready for a hard year, says gloomy Taoiseach

TAOISEACH Bertie Ahern warned of a "hard year" ahead as the economy took a severe battering on three fronts yesterday.

Mr Ahern's gloomy assessment came amid the backdrop of massive job losses in the construction sector, a looming US recession and a fresh surge in international oil prices.

Disturbing new figures reveal one-in-10 builders have lost their jobs over the past last 12 months, fuelled by the slowdown in the property market.

Meanwhile abroad, the US economy continued to slide as the weak dollar helped oil prices to set a fresh record approaching $108 a barrel.

There were tentative hopes of a revival in the property market as new figures published yesteday reported an increase in the number of people taking out mortgages last month.

However, Mr Ahern warned there would be no "bounce back" for the foreseeable future.

And he said predictions that the sub-prime mortgage crisis in the US housing market would be over by Christmas were "some way off the mark".

"This week in the United States, it seems as if they're in for serious problems in a huge range of companies. And that's having a knock-on effect for the world economy. And we won't escape that," he said.

The property slowdown here is already seriously affecting State finances. Exchequer returns for the first two months of the year are running €500m below budget target levels.

"Every 10,000 houses we build less knocks 1pc growth off and that takes a fair bit of employment off. It also takes a considerable amount of revenue out too," Mr Ahern added.

However, Labour leader Eamon Gilmore last night accused Mr Ahern and his ministers of lacking any sense of urgency to deal with the growing crisis.

"The latest figures make for grim reading," he said. "There is scope for some of these workers to find work in other forms of construction activity -- provided that they have the relevant skills. If we are to avoid people slipping into long-term unemployment, then we must act now to address their skills and training needs."

Fine Gael enterprise spokesman Leo Varadkar accused Mr Ahern of trying to deflect blame for the current economic situation onto the housing downturn and the sub-prime crisis in the US.

"The real reason for the long term downturn we're facing into is loss of competitiveness and that's happened in my view as a result of Government policies that have driven up labour costs, driven up the cost of doing business and making us uncompetitive in the world economy," he told the Irish Independent.

There were some hopeful signs of a pick-up in the housing market yesterday as brokers reported an increase in the number of people taking out mortgages last month.

A joint survey by IIB Homeloans and the Irish Mortgage Advisers' Federation found the market has "bottomed out" -- and is likely to rise over the coming months.

The survey was released as independent brokers IFG Mortgages reported a 33pc increase in the value of mortgages taken out in February compared with the previous month.

However, the economy's over-reliance on construction was starkly underlined as new figures from the Central Statistics Office confirmed more than 11,000 people (10.3pc) working in the construction sector lost their jobs over over the past 12 months. The number of people working in construction has now fallen to almost its lowest level in eight years.

Even though a downturn was expected, the sheer scale of the drop came as a shock to most commentators. And there could be an even sharper fall next month as builders continue to lay off workers and demand for new houses continues to slow.

Meanwhile, oil prices set a fresh record in New York yesterday approaching $108.

A survey of petrol stations carried out by the Irish Independent reveals many have already passed on the increase at the pumps, with further hikes expected over coming weeks.

- Michael Brennan, Ciaran Byrne and Charlie Weston
(c)Irish Independent
Last modified on Tuesday, 11 March 2008 10:31