Colm McCarthy on the fiscal adjustment and rebalancing the economy

A report by Colm McCarthy on the challenges facing the Irish economy is available on Scribd.

In the five quarters from 2008 Q1 to 2009 Q2, Ireland’s real GNP, seasonally
adjusted, has fallen by 13.5%. The unemployment rate has risen by eight points,
labour force participation has fallen and emigration has resumed. The economic
decline in Ireland exceeds by a large margin those being experienced by most other
European countries, and constitutes the worst recession in Ireland since the early
years of the Second World War. The policy challenge involves much more than fiscal
consolidation, or recovery from a routine cyclical downturn. In an address to the
recent ESRI/Foundation for Fiscal Studies conference, the Central Bank governor
argued that Irish macro policy needs to focus, not just on the correction of the fiscal
deficit, but on a broader re-balancing of the macro economy, acknowledging the
nature and causes of the economic downturn from which recovery must somehow be
managed (Honohan (2009b)).

Well worth a read – full report.