Not only is the Republic suffering from the worst of all possible worlds but there appears to be a yawing gap between Irish and British handling of the crisis. Gordon Brown and Alistair Darling are so far refusing to sue the R word and promising to spend their way out of recess .-sorry negative growth.
How will all these projects be paid for if taxes do not go up and there are no cuts in state spending totals? Inevitably, by borrowing more, the Chancellor confirms, justifying this by pointing to debt reductions in the 10 years from 1997, when Labour came to power. ”
Ernst and Young the only forecasters to use the Treasury model say it should be a relatively short and shallow downturn
but the Chancellor will be forced to borrow almost £100bn next year
Inflation will fall, allowing the Banks Monetary Policy Committee to reduce rates to 3pc by next summer. As a result, the pound will fall against the euro and dollar, reaching a low of $1.65 by end-2009..
Of course the contrast may turn out to more apparent than real, a matter of timing than good economic management, where the similarities are greater than it appears on the surface. The Irish were unfortunate in having their Budget scheduled for the height of the crisis. In the UK, Darling can hardly hold the line against increasing taxes when he delivers the pre-Budget report in a few weeks time.