Ireland did everything the EU asked of it. It slashed spending, it cut jobs, it cut public sector wages. Ireland was praised for its 'courage' in implementing austere fiscal policy which would reduce the deficit and 'improve confidence' in the economy.Apparantely, some people are now surprised, that Ireland is now facing a shocking collapse in GDP. The Irish economy shrank by 1.2pc in the three months between April and June compared (an annual decline of 4.8%)
Has no one in the EU heard about Herbert Hoover and the initial response to the Great Depression?
Of course, being in the Euro makes it even more difficult because as well as fiscal retrenchment there is no possibility of exchange rate devaluation or loosening of monetary policy to help the economy.
So the EU response has been to
•precipitate a second recession
•Cause interest rates on Irish bonds to rise to a record 6.3%
•leave possibility of debt default.
The talk is of Ireland implementing further cuts or a partial debt default. But, there is depressingly little talk of the ECB implementing quantitative easing, which is what they need to do.
Very interesting. Is it possible for a country to temporarily 'opt out' of the Euro for convenience's sake? Isn't this a hefty disadvantage to the Euro?
ReplyDeleteAlso, what kind of bloody idiots do we have running governments? The EU, the EU, the EU, emphasis on the EU, a bunch of 'clever' economists, who know all of the answers, told Ireland to cut spending. Yes, bloody right I'm angry. Haven't they heard of negative multiplier? Keynes maybe? Why?!
Oh my gosh, I just love Keynes. And, as well, I think the EU should listen more to Nigel Farrage.
Sami.
@Sami
ReplyDelete"Is it possible for a country to temporarily 'opt out' of the Euro for convenience's sake?" If any country were to opt out of the Euro, the entire Eurozone would be doomed to failure and we would be plunged into another world recession.
Ireland had to cut spending, otherwise we would have another indebted country which would threaten to stability of the Euro and risk the collapse of the Eurozone if it were allowed to default on its debts. The negative growth experienced by Ireland is hardly going to bring global economic growth to its needs, rather it will continue and will also pull Ireland along with it. This is a small price to pay for long term economic stability and one that has saved Ireland, amongst other PIIGS, from experiencing the same fate as Greece, except on a much larger scale.