Premier Dr. Ewart Brown spoke to the Island last night and acknowledged that Bermuda will be affected by the turmoil afflicting world financial markets.

It was about time. He has been noticeably quiet on the issue, allowing Finance Minister Paula Cox to do much of the heavy lifting. Last night he at least acknowledged that Bermuda is not immune from an economic downturn.

While no one can say with certainty just what the ramifications of the financial crisis are, it is possible that Dr. Brown is still being too optimistic.

While he rightly noted that insurance and reinsurance tend to be more resistant to recessions than other industries because people still have to buy insurance, it is difficult to determine what underwriting conditions will be like in a shrinking global economy in which the future of at least two major Bermuda insurance players are decidedly uncertain. Nor is it clear how much more of a battering insurers' investments will take. It is good news that Government will "continue to do what it needs to do to ensure we are well positioned to keep international business strong" and that he will meet with international business leaders to "reassure them that this Government values them immensely and stands with them resolutely".

That's welcome, since the messages until now have been decidedly mixed. Dr. Brown admitted that new international company formations have slowed in the last quarter, and attributed that to the financial crisis. But Bermuda has done itself no favours: Refusal to relax term limits when people Bermuda needs now more than ever are being driven off the Island, "Sven and Johnny", our failure to control high costs, and a general complacency about international business have made Bermuda less attractive than it was even five years ago.

Dr. Brown also admitted that the industry for which he has direct responsibility, tourism, will suffer in an economic downturn.

"Matching the statistical performance of prior years may not be possible," he said, in a remarkable bit of euphemism. Isn't it blindingly obvious that Bermuda will fail to match 2007's arrivals when the second quarter of 2008, which ended months before the recent financial panic, was already the second worst in 28 years?

He also acknowledged that "the credit crisis will make it tremendously more difficult for developers to secure financing for new hotel construction".

That's right, and he admitted that one project has indicated "new challenges with getting started as planned". But he added: "The others appear to be on track and have not indicated that they expect trouble with financing." That's welcome news, although a little difficult to believe in the current climate.

Curiously, Dr. Brown did not mention the third driver of the Bermuda economy and one that may well be more important than tourism – construction - where a slowdown seems almost certain in 2009. As expected, Dr. Brown also said the social programmes like free Bermuda College tuition, bus fares and day care will go ahead, and said they can relieve the burden on low income families. He did not, however, say how they would be paid for at a time when Government revenues are likely to be falling.

It's good news that Government plans more public projects in the short term, and it is to be hoped that it will be able to get financing for them at a time when financial institutions are still reluctant to lend at favourable terms.

Other spending reductions, like the one on travel, are ten years overdue. The decision to put a moratorium on "all but essential travel" begs the question of how much non-essential travel was being done before.

Dr. Brown also claimed that Bermuda is benefiting from the strict lending practices "we had in place"; but this is not strictly true. While Bermuda banks never went as mad as those in the US and elsewhere, the fact is that terms have been made easier in the last two or three years and that this contributed to the run-up in house prices. At the same time, Bermuda banks have fully lent their entire stock of Bermuda dollars and have been using foreign currency deposits for local lending. Bermuda's banks have not seen defaults primarily because real estate values have not slumped as they have in the US. But they have shown signs of softening, and no one should be overly optimistic. Six months ago, few were predicting the financial turmoil that has gripped the world.

Of course, it is important for leaders to be optimistic and confident at times like these. Too downbeat an assessment could cause a panic, and it is still possible for a country to talk itself into recession.

But honesty is critical as well. Bermuda needs to prepare for difficult times and it needs straight talk. It did not entirely get it last night.