The Irish economy's extreme dependance on international trade coupled with very high consumer debt makes us vulnerable to a collapse in exports and a big drop in consumer spending. A borderline depression is a strong possibility in 2009, with a massive drop of say 10% in GNP and unemployment in the teens.
This would put tremendous pressure on the government's finances.But even in a conventional recession,the government budgetary deficit will be a shambles,let alone in a near depression.
The spectre of massive looming deficits for years to come will force the government to think the unthinkable. It will have to implement massive redundancies in the civil service and the public sector,with layoffs of maybe 50,000 or more. Some of these layoffs could be prevented if the public sector trade unions agree to pay cuts for the huge numbers of overpaid public sector workers in the €50,000 to €100,000 a year bracket. Given the unions' influence and power over the government, that is unlikely unless the economy is approaching depression.
The hue and cry of the public sector unions will be to stop the sackings of nurses,teachers and gardai,the front line staff essential to good public services. The unions would like the public to overlook the fact that a government that has expanded rapidly for a decade has become very bloated and overstaffed in its back office functions. That is where the cuts must be concentrated. However,the tendency is for managers in these jobs to cut front line staff to save their own skins.



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