Lessons from Ireland

Writing in The Telegraph Liam Halligan argues Ireland offers a road map for UK recovery

Ireland’s mature, responsible approach to fiscal consolidation means its bonds are now flavour of the month. That’s an extremely significant prize because, with its sovereign creditors on side, Irish investment and employment will now be more buoyant, growth will recover quicker and Ireland will return to prosperity much sooner than it otherwise would have done.

The UK’s weak-willed response to its fiscal crisis means, in contrast, that PIMCO – the world’s largest bond-holder – is now warning, in ever more lurid terms, against buying British government debt. And no wonder. UK gilts do indeed seem a bad buy, given that the amount of debt the country will issue over the next few years – a direct result of our politicians’ determination not to face reality – will inevitably cause inflation and a weaker pound. To say nothing of all that money printing – sorry, “quantitative easing”.

Ireland and Britain currently have roughly the same annual budget deficit but that’s where the similarity ends. Ireland is on the road to fiscal recovery and sustainable growth. The UK is on the road to perdition.

Could the different approaches taken by the British and Irish governments constitute a natural experiment on the relative merits of Keynesian stimulus versus fiscal consolidation?