Irish finance minister Michael Noonan's confidence trick is being perpetrated on the Irish people to keep them thinking they are best served by remaining in the eurozone – as today's grim GDP figures reveal

Listening to Irish finance minister Michael Noonan you would think that exporting lots medical devices and gallons of milk is enough to support a vibrant economy. More than that, a few minutes in his company and you might be forgiven for believing this export fever will also bring down one of the biggest debt-to-GDP ratios of any nation in modern history.

It is the cheery, optimists version of economics he subscribes to, with the cavalry, in the form of the IMF, rescuing everyone in the final reel.

That's not to say there isn't some merit in the argument. If enough people believe what is said by politicians, they might stop cutting costs and issuing P45s. They might invest in their businesses and employ more staff.

To this end, Ireland's exports are up and it has the rare boast of a trade surplus, something the UK would prefer to its current deficit.

But Noonan's strategy is not built on firm foundations. As such, it is not so much a confidence boost as a trick. And one that is being perpetrated on the Irish people to keep them thinking they are best served by remaining in the euro currency zone and paying back all their debts.

Obviously it is not an unusual stance. It is the same message from every indebted government in the eurozone.

Irish ministers love the popular T-shirt slogans "Ireland isn't Greece" and "Ireland isn't Portugal". The trouble is, Dublin is closer to Lisbon and Athens than Noonan cares to admit.

Today's GDP figures are testimony to Noonan's ridiculous optimism. The economy contracted by 1.9% in the third quarter, far worse than expected. To quote the Reuters story: "Ireland was the worst performing economy in the eurozone in the third quarter apart from Greece, which no longer publishes seasonally adjusted figures, marking a stunning reversal of fortune from the second quarter, when it was the second-best in class after Estonia, official data on Friday showed."

Think of the Irish economy as a cake. The government has managed to cover the top with fresh cream, but inside the mixture is still half-baked, soggy and slowly sinking.

Noonan said the Irish banking sector was strong after a series of bailouts that put them on a firmer footing than continental rivals. But during a question and answer session in London this week he dodged the issue of why their accounts remained opaque. He also glossed over that euroland and UK banks are a poor comparison because most of them are technically bust and currently rushing around selling assets, cutting lending or negotiating with their governments for a financial safety net.

Ireland's banks are no different. If we accept Noonan's view that Anglo Irish is in such a bad way even its "good bank" is out of the picture, there is still Bank of Ireland and National Irish to consider. Neither has the capacity to survive a full-blown euro crisis. Neither can lend much to Irish citizens even if a euro disaster can be avoided.

Ireland followed the same universal banking model adopted by the UK, the French and the Germans: banks that can do anything, from retail current accounts to corporate lending and investment banking. Most of the lending went to property developers. Unlike UK building firms, Irish developers built homes with the money, which means, from an economic perspective, Ireland is in a worse position, with hundreds of thousands of empty homes and falling house prices.

According to a report issued by the Department of the Environment earlier this year, entitled Resolving Ireland's Unfinished Housing Developments, many of the 1,655 incomplete development sites have 'serious completion issues where residents are significantly affected'. To turn the situation around, these developments "may require some level of intervention by the State," it says.

Productivity in Ireland jumped last year after workers accepted pay cuts and job losses. This rise in the productivity - or the amount produced per person - boosted figures for output this year. But without further wage cuts there will be no repeat in next year's figures. Productivity is a key driver of growth. Last year looks like being a one-off.

Noonan has downgraded the forecast for growth next year and announced budget cuts and tax rises equal to 2.4% of GDP.

Somehow he thinks that pointing to the growing export sector will distract the Irish public from the fundamental problems of paying back debts with a smaller and slower-growing economy. By the same token, declining incomes and declining wealth, in the form of property, will be ignored in favour of sticking with what they know, ie the euro.

Noonan told Bloomberg TV that Irish voters would pass a referendum on new European Union fiscal rules if one is required because they would not risk being forced out of the eurozone.

"It really comes down on this occasion to a very simple issue – do you want to continue in the euro or not – and faced with that question I think the Irish people will pass such a referendum," he said.

Well, maybe he's right. But the vote will only pass if the electorate are conned into thinking a long and winding road of falling incomes is the only option. A debt-to-GDP ratio of 120% by 2013 is too big for any country to handle without some debt forgiveness. It's the same for Greece, Portugal, Spain and Italy. Even France, not that Paris will admit it. The UK? We devalued our currency, so are already paying 75p on the £1.