A well performing adjustment programme?

As Mick has noted, the news coming from the latest in a long line of EU economic crisis summits appears to be good for the Irish government. The rather terse statement issued at 4 am this morning is being pored over by economists as if it were some Joycean text, but it is pretty light on detail.

Despite the limited information available, RTE are taking the throaty enthusiasm of An Taoiseach at face value and are fairly happy that the state has secured a deal on debt burden, although it’s recent record on reading the Euro runes has been questionable (if not misleading).

The actual wording, that refers to Ireland, states:

The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally.

There isn’t a lot to parse there, although there is no actual commitment to retrospective changes (which is what Dublin needs) and the reference to a ‘well-performing adjustment’ can be read whatever way you like (i.e. ‘worth rewarding’, or, ‘working, so why fix it if it ain’t broke’). However, if the positive noises being made by the government (and RTE and other embedded media) are meaningful, then you would expect the government to be preparing to reverse or postpone some of the more heavily criticised austerity measures that have a minimal impact on the fiscal adjustment programme that is performing so well, but a hugely significant impact on some of the most vulnerable groups in the community. According to the Finance Minister, Michael Noonan, despite the apparent breakthrough, that isn’t going to happen any time soon.

The danger, for the government, in talking up any great breakthroughs or deals, while enforcing a continuation of overt austerity measures, is that it might expose ‘austerity’ as an ideological project covered by the economic smoke of the recent crises.

In that light, it would be interesting to get clarity on whose behalf the adjustment programme is actually performing well?

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  • Alias

    “In that light, it would be interesting to get clarity on whose behalf the adjustment programme is actually performing well?”

    The foreign lenders, who else?

    The only change here is that the ESM may recapitalise the banks directly. That may be useful if the eurosystem banks based in Ireland (which are in actuality now among the best capitalised banks in the EU) require additional capital as a result of further deterioration of their balance sheets.

    It’s not too clear what recapitalise means here anyway, since you can’t recapitalise a bank by lending it money so presumably it means a capital for equity swap.

    It is not, however, any form of debt reduction that the government promised or may try to present it as being.

  • you would expect the government to be preparing to reverse or postpone some of the more heavily criticised austerity measures that have a minimal impact on the fiscal adjustment programme that is performing so well, but a hugely significant impact on some of the most vulnerable groups in the community

    Depends on whether the priority should be avoiding short-term pain or getting the country out of its long-term hole. If you see the light at the end of the tunnel, is that justification to slacken your efforts?