With gloom spreading to every corner of the economy, Brian Cowen needs to rebuild national confidence. He can do so by making an emergency and radical appointment to his cabinet. And who better than Charlie McCreevy, the European commissioner with responsibility for the internal market? He would make an ideal minister for trade, enterprise and employment, allowing Cowen to retain Mary Coughlan as tanaiste but moving her to a more suitable — and less onerous — post.

The move is possible under the constitution and could have substantial benefits. On a practical level McCreevy’s appointment would allow Brian Lenihan to share some of the enormous burden that rests on his shoulders in the finance department. And it would give Cowen another knowledgable voice at the cabinet table.

It would also send out a signal to the business community, in particular, and the public highlighting the gravity of the situation and the requirement for the kind of experience that might get us out of this mess.

Something is needed because the daily situation is going from bad to worse. In public, many businesses are putting a brave face on things. In private, they admit that they are facing crisis. Many investors and entrepreneurs have endured massive losses, mainly because of ill-judged forays into property. Some are facing ruin.

Other companies are in danger of toppling through no fault of their own because creditors simply aren’t paying them. This is creating a domino effect, and is made worse by the banks’ appalling behaviour. Some are operating a zero-tolerance policy, threatening to withdraw credit and bounce cheques if cash isn’t lodged to accounts immediately or loan repayments are missed. These institutions are showing no mercy to customers despite the luxury of the state guarantee that saved them from their own recklessness.

Getting new finance on reasonable terms remains very difficult, notwithstanding the fact that the €400 billion bailout was designed to ensure liquidity for the economy. The banks may be looking to shore up their balance sheets, but too much caution is counterproductive and threatens to bring everybody else down with them.

In these circumstances, plenty of people would welcome McCreevy’s return. He has a real knowledge of how business operates and his imaginative, often counter-intuitive, approach to finding solutions to problems would be welcome. He is not scared of confrontation and would take no nonsense from the banks. He also speaks with authority and confidence, something most other ministers don’t do. His presence might even persuade consumers that it is all right to spend instead of hoard, which is another factor contributing to the downturn.

I’ve criticised McCreevy in the past, particularly in relation to the explosion in public sector spending he oversaw in his seven years as finance minister. He did some daft things too, such as guaranteeing an outrageous diversion of tax revenues to the horse and greyhound racing industries. So I wasn’t too concerned when Bertie Ahern shunted him off to Brussels in 2004. Now I think I may have misjudged him.

McCreevy’s stint in finance clearly suffered because of the populist Ahern, who prevented him from doing his job properly and then sacked him for short-term political gains.

He came to finance just as the economy was starting to motor strongly, but his radical tax cuts helped move it into fifth gear. He generated sufficient extra tax revenues for necessary public sector investment, which allowed the country to catch up after decades of underinvestment in health, education and infrastructure. Serious productivity gains were achieved during the lifetime of the 1997-2002 government. But after the 9/11 attacks, the dotcom meltdown and the foot-and-mouth crisis, things went askew. McCreevy spotted the problems and knew what needed to be done, but Ahern would have none of it.

McCreevy wanted to bring the public finances under control prior to the 2002 general election. His government colleagues, emboldened by Ahern, ignored him. When he finally got around to the job it was too late, but Ahern didn’t have the stomach even for limited cuts. So McCreevy became the scapegoat when the electorate punished Fianna Fail in the 2004 European and local elections on the back of the action taken. Chastened, Ahern sacked McCreevy, declared himself a socialist and allowed populism to flourish. Competitiveness and productivity were off the agenda and growth became an illusion.

There were obvious dangers in allowing a property bubble to be created on the back of record low interest rates, but Ahern’s McCreevy-less government made two other errors. It continued to accelerate public spending, and the exchequer became almost completely dependent on revenues from exceptional property activity.

Ahern, always willing to go the extra mile for his buddies in the building industry, revealed his “inner gurrier” to anyone who pointed out the dangers in his strategy and, consequently, bequeathed his successor a poisoned chalice. Cowen, as McCreevy’s successor, may have suspected Ahern’s instincts but his misguided loyalty to the leader meant he carried out the taoiseach’s wishes anyway.

Some might suggest this idea is copying what Gordon Brown has done in Britain by recalling Peter Mandelson, but so what?

Britain is treating the current crisis as if it were a war, and that’s what we need to do. General McCreevy should be conscripted.

After a dismal start, Lenihan and Cowen have started to show leadership, but they now have to go further in delivering the most important budget in living memory. The inadequate cutbacks announced in the summer, the massive decline in the exchequer finances and the extraordinary international events of the past few weeks mean the government must act ruthlessly now and repair its relations with the electorate later.

Lenihan should be prepared to become the most unpopular finance minister in history. Child benefit should be taxed at the marginal rate and medical cards provided only to those in need. Various tax credits should be restricted to the standard rate and not the marginal one. A citizenship tax should be levied on multi-millionaires who chose to make themselves tax exiles. McCreevy’s ring-fencing of betting tax revenues for horses and dogs has to be abandoned. The list goes on.

Expenditure on the public sector has to be slashed. The addition of 75,000 employees in the past eight years — bringing the number to nearly 320,000 — was hard to justify then and impossible now. Lenihan is talking about 5,000 redundancies; 20,000 would be more like it. Payments into the National Pension Reserve Fund must not only be stopped, but the money in it repatriated and used to pay for infrastructure or to recapitalise the banks.

The fall-out after Tuesday will be unprecedented but that is when the government must hold firm. McCreevy’s return would help stiffen its resolve.

matt.cooper@sunday-times.ie

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