OVER THE last two weeks this column has discussed the loss of competitiveness that we have experienced with the UK and Germany. To regain competitiveness we need to cut our prices by 15 to 20 per cent. Because our prices and costs are too high, our businesses cannot compete. This has meant that we have experienced a much worse recession than most countries.

Three weeks ago I showed that the figures for unemployment being quoted by the Government give a completely misleading impression of the situation. Since the summer of 2007 we have lost more than one in four of all the fulltime jobs in the private sector. The fall in full-time employment in the private sector is disguised by an increase in employment in the public sector and in parttime employment.

The national debt is rising rapidly. There is some dispute about how to calculate the national debt and the Government has been criticising Standard and Poor, the rating agency. S and P said that there is a growing risk that Ireland may go bankrupt. However, it does not matter all that much what Standard and Poor say. The people who have money to lend now believe that there is a possibility that Ireland will go bankrupt. Lenders are willing to lend money to the German government for 10 years at a rate of interest of 2.2 per cent per annum. The same lenders are only willing to lend to the Irish Government for 10 years at a rate of interest of 5.7 per cent. We are paying 3.5 per cent more than the Germans for long-term loans.

We, as a country, are on the edge of bankruptcy and we have a government which is largely ignoring the private sector. They focused, for the last two years, on the banks and on the Government Budget while the private sector was collapsing.

In 1987 the country was also on the edge of bankruptcy. In 1986 all the income tax taken in by the Government was used to pay interest on the national debt. We escaped from bankruptcy in 1987 by getting growth going in the private sector. The Haughey/McSharry government in 1987 was lucky because one of the last acts of the outgoing Fine Gael/Labour Government was to devalue the Irish Pound by 10 per cent. This meant that prices and cost in Ireland were low relative to Britain. McSharry made sure that Irish prices and costs did not rise. Almost all Irish businesses selling on the British market were able to make money and expand. Irish wages were lower than British and our welfare payments were also lower than their British equivalent. This meant that Irish businesses started to hire workers and Irish workers were enthusiastic for all kinds of jobs. A major side benefit of the McSharry approach was that lenders grew confident and were willing to lend to the Irish government and Irish businesses at lower interest rates. The rate of interest on my mortgage, with the Irish Permanent Building Society, fell from 12.5 per cent in January 1987 to 8.2 per cent in January 1989. The rate of interest on long-term borrowings by the Irish Government fell by a similar amount.

This left more money in the pockets of ordinary people and they went out and spent it. The fall in the rate of interest on government borrowings also cut government spending. Within five years the Irish state had been rescued from bankruptcy.

What we need to do now is to cut costs so that Irish businesses can compete. If our business can compete and make profit they will expand and hire workers. This must be done especially in all the areas that the Government controls directly.

Cutting costs is now the most pressing issue facing Ireland. If we were lucky enough to have a change in government, the incoming taoiseach would have to give leadership to the country in cutting costs. The taoiseach is paid €240,000 compared with the British prime minister who is paid the equivalent of €170,000. I would like to see us with a taoiseach who had the courage to announce, on his first day as taoiseach, that he was cutting his salary to €150,000. Then he could turn around and say to all in the public sector that he wanted similar cuts. Many senior officials including judges would say that he was acting illegally. He would then say to the judges to go to the High court and argue their case.

These cuts would have to be fair and an appropriate formula would have to be worked out. I spent a few minutes and came up with a simple formula. All income up to €50,000 – cut by 10 per cent, next 50 cut by 20 per cent, next 50 cut by 30 per cent, next 50 cut by 40 per cent and all above €200,000 per annum – cut by 50 per cent. This formula would reduce the Taoiseach's salary by €70,000 from €240,000 to €170,000. He could say that he was taking an extra cut of €20,000 himself because he did not have expensive tastes and could live well on €150,000 and that Tanáiste Eamon, as a socialist, could live on €140,000.

The country is on the edge of bankruptcy. We have lost one in four of all the full-time jobs in the private sector. Our lenders will only lend to us if they get 3.5 per cent more than the Germans are paying. Cutting costs should be the national priority.

- FELIM O'ROURKE