The Challenge Facing Cowen

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Ireland Calling with John Spain

The Challenge Facing Cowen

April 16, 2008

by John Spain

THERE’S a story told about our taoiseach (prime minister) in waiting Brian Cowen that I particularly like because it reveals a lot about the kind of guy he is. Cowen, as I outlined last week, has held five senior ministerial posts, even though he is still only 48.

Currently he is minister for finance. Before that he was in foreign affairs, health, and transport and energy, but his first job in high office was as minister for labor back in 1992 under the then-Taoiseach Albert Reynolds.

The story goes that on his first day in the big job the senior civil servants in the Department of Labor were all in their offices early for the arrival of their new young minister (he was then 32). They were waiting a bit anxiously for the moment his ministerial Mercedes would pull up outside the big office block so that they could welcome him on board and explain to him how the department was run and what the priorities were.

Cowen, however, hopped out of the limo at a cafe or a pub somewhere nearby and went in for some refreshment and a read of the morning paper, as you would when you’re heading into work on your first day.

He then proceeded on foot and walked into the department, where the first person he met was the porter/security man at the front desk. A leisurely conversation ensued, during which Cowen asked him about all the people who worked in the building and who was who and how the place operated, as well as where his own office was.

He then made his own way upstairs to his office and introduced himself to his new secretary, with whom he had another long chat about how the office functioned. Only then did he let the senior mandarins in the department know that he had arrived.

And when they all rushed in to meet him it was already very clear who was in the driver’s seat.

As my daughter likes to say, how cool is that? One theory on why he did this is that he knew he was going to have to make major changes in the way the department was run (and he did), and he wanted to keep his top civil servants at arm’s length for a while.

But I think it’s simpler than that. It’s just the way he is, informal, straightforward, supremely confident.

He’s also very laid back and very country (Cowen, as you know by now, comes from the midlands, or “the bog” as the Dubliners like to call it). He is highly intelligent, but wears it lightly and has a low tolerance for posers and pretension.

And already he is showing that when he takes over from Bertie Ahern as taoiseach in a few weeks, he will do so with minimum fuss and maximum competence.

He has the ability, the experience and, above all, the self-belief. It’s that rooted sense of who he is and of what has to be done that will be his inner strength in the years ahead.

And the years ahead are going to be very difficult and very different to the hayride that Ahern had on the back of the Celtic Tiger over the past 10 years. Harder times are coming in Ireland, and there’s not a thing we can do about it.

It’s no wonder that there was a certain rueful reluctance in Cowen’s acceptance of the top job. He knows what’s coming, even if a lot of other people here have yet to wake up to the new reality.

The fact is that all the economic indicators here are pointing in the wrong direction. Every day seems to bring more evidence of the slowdown ahead.

Last week it was the news that tax revenues for the first three months of this year are *600 million less than was forecast in the budget. If it keeps going like this — and it’s likely to get worse rather than better — the tax take will be well over *1 billion down by the next budget at the end of the year.

Because Cowen knew, as minister for finance, that the downturn was well established when he produced his last budget in December, he had already allowed for a deficit this year (the gap between government spending and revenue) of around *3 billion. Now it looks like the deficit in 2008 will be at least *4 billion, and I won’t be surprised if it hits *5 billion. And that’s not small potatoes.

What this means is that running the government and the state services (everything from education to justice to health) is going to be much more difficult as public expectations are not met and dissatisfaction grows. It’s going to take a very strong captain to sail us through these stormy waters, and it will test Cowen’s ability and resolve right from the start.

If he gets any honeymoon at all it’s going to be a quick weekend in the rain rather than a few weeks in the sun.

Some of the other indicators to emerge in the past week or two of what lies ahead were for unemployment and inflation. The figures for the past month show that the number out of work here is growing at the fastest rate for the past 25 years.

And in spite of the slowdown, inflation is up to 5% thanks to soaring energy prices (which is hitting home heating and industry as well as cars) and commodity prices (the staples like bread, flour, meat, milk and so on are all up by an average of 20% in the past six months), and this is hitting the weekly shopping basket.

A lot of this has to do with soaring oil prices and the sub-prime mess in the U.S. and the effect that has had on the global economy, and there is nothing we can do about that except grin and bear it.

But some of it has been of our own making, in particular the inflated housing market here which is now deflating like a slow puncture. Nobody knows how long that will continue, but a “correction” of at least 20% now appears to be accepted as inevitable by most economists in the housing sector.

Anecdotally it’s even worse, with horror stories of some developers slashing prices of new homes by a third in a desperate attempt to sell. Several firms have gone into liquidation.

New developments — or new home “starts” as they call them here — are few and far between. Developers are concentrating on clearing their unsold stock from last year before starting any new builds this year.

The result is heavy job losses in the construction sector since the start of this year, which accounts for most of the jump in unemployment we have seen in the recent figures.

So the picture facing Cowen is not pretty. As inflation creeps up the unions here this week are limbering up for the next round of pay talks and are dismissive of any suggestion that they should moderate their pay demands.

And the demand for extra government spending on schools and hospitals is louder than ever, as ordinary people ask where all the Celtic Tiger money went.

The other problem for Cowen is that his great strength, his aggressive put-down of opposition attacks on government policies, is not going to work as well in the future. As the pressure grows, people will want real answers and explanations rather than merely bullish statements of how it’s going to be, the hallmark of Cowen’s style up to now.

The more you think about it, the more obvious it is that Bertie is getting out at the right time. He’s had the best years. Why hang around for all that grief?

And is it any wonder that Cowen looks as grumpy as ever?

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