“It may very possibly be that Ireland is in the worst of both worlds..”

Crooked Timber’s Henry Farrell with a quick overview of the Irish budget announced yesterday.

As a small open economy, Ireland would probably have devalued to help cushion the shock, if it had not been an EMU member with no effective control over its currency. Given EMU membership, devaluation (and exit from the system) would probably have been a very bad idea. Ireland is hoping to make the best of a bad job, adding levies, increasing taxes and making swingeing cuts to public sector pay so as to shore up its fiscal position. The problem is that all the fiscal rectitude in the world cannot protect you from contagious crises of confidence.

, , , , ,

  • Rory Carr

    “It may very possibly be that Ireland is in the worst of both worlds..”

    Given that the poor, benighted island has long been under the twin jurisdictions of Free State Leinster House and Not an Inch Stormont this is hardly the most earth shattering conclusion to draw.

  • Mack

    On the other hand, we now know that the Greek government has deliberately and substantially falsified its national accounts over recent years. Also, Greece shows no political will to impose any meaningful discipline on tax and spending. Her adherence to the Growth and Stability Pact is a charade. If the ECB bails out Greece, all semblance of future fiscal discipline throughout the Euro zone is lost. Again, bad news for Ireland. How can the ECB bail out Ireland if it refuses to bail out Greece?

    That is the point the IMF would step in, and they’d only step in with a loan if the country they were lending to was willing to impose fiscal discipline.

    Ireland is much better candidate for aid than Greece. In fact because we have shown fiscal discipline any IMF loans may well come on the basis that we continue as is.

    I’m not convinced that the ECB would want the IMF on their turf, and I suspect they’d let Greece howl in the wind until they are willing to play ball and then they’d bail them out – with strings attached…

  • Adolf

    Send the immigrants home. Abolish unmarried mother’s allowance, abolish pensions for Mary Robinson and her ilk, abolish the presidency, merge the main banks, give all drug pushers fatal over doses, send all prisoners to Siberia, ignore all EU law. Make our land a nation once again.

    Bring back the bike.

  • Mack

    Also bear in mind the Irish bank guarantee scheme ends in September next year, that has been in large part the source of our difficulties in the sovereign debt markets. Our national debt is below that of the UK.

    When that expires we’ll be free to explore less costly solutions to the banking crises, should they be needed..

    It may even be possible to consider a reflation of the economy? Perhaps this was what Brian Lenihan meant when he said this was the last bad budget?

  • Greenflag

    Oh dear even the Americans are going ‘bolshie ‘ according to the masters of the universe over at bloomberg ,

    http://www.bloomberg.com/apps/news?pid=20601070&sid=awkrRPMONDW8

    We in Ireland (the real Ireland ) shall muddle through as always hopefully having learned a few lessons in never ever placing more than a modicum of skeptical trust in our bankers , insurance companies , credit card purveyors , clerics , politicians , medical consultants , building developers , economists ,dieticians , car salesmen and civil service mandarins .

    Those in the ‘unreal Ireland ‘ will also muddle through with not a little help from their friends at the Exchequer .

  • Greenflag

    Perhaps this was what Brian Lenihan meant when he said this was the last bad budget?

    You missed the add on silently mouthed ‘for me anyway ‘;)

    ‘Our national debt is below that of the UK.’

    Considering the relative demographics a not unreasonable expectation 🙁

  • Brian Walker

    The Irish economy blog suggests foreign bank holding companies might be persuaded to buy up the Irish-owned banks presumably to reduce the State’s exposure. But would foreign banks want to buy them?

  • Jimmy

    The poor Free State, The most Hedonistic nation in Europe, It had the highest usage of cocaine takers in Europe, The Highest alcohol consumption and certainly the most enthusiatic of consumers and a building and credit boom to sustain that Hedonism. Took Thousands of unwanted immigrants that it now wants to send home.

    The Party is over, and as Usual the Harder the Party the bigger the Headache is going to be.

    Prudent Presbyterian Ulster doesnt look so bad after all.

  • Glencoppagagh

    Jimmy
    “Prudent Presbyterian Ulster doesnt look so bad after all.”

    Especially when you consider that most of them are living at someone else’s expense.

  • Reader

    Glencoppagagh: Especially when you consider that most of them are living at someone else’s expense.
    With massive government debt across the board, most of the people on these islands are living at someone else’s expense this year. What is Brown’s 175 billion annual deficit other than an all-UK subvention from lenders?

  • Greenflag

    ‘Prudent Presbyterian Ulster doesnt look so bad after all.’

    At 6 billion a year subvention ‘prudence’ should be affordable 🙂

    So all that hullabaloo with the Presbyterian Mutual high interest grab and wipe out has now been covered up and the grasping elders /advisors paid off and the widows and orphans looked after?

    I read the Madoff sons and ex employees are having a tough time getting rehired in the financial services sector . apparently nobody bar their lawyers believes that they knew nothing about their father’s ‘sins ‘ . A blot on the family escutcheon eh !

    Some blot . Ponzing off 12 times the wealth of the Vatican over a period of two decades is I would think a noteworthy achievement by any stretch of the imagination and keeping the kids from knowledge of the heist even more incredible . Makes our Seanie Fitzpatrick and his ilk look like kindergartners .

    Now if only Madoff had been a Presbyterian he’d never have have stolen 60 billion dollars eh ?