Ireland forced into a new era of austerity

Andrew64

Any bets that our Budgets are going to look like this? Until just a week or so ago, the Great Saviour of the Universe (Brown!) was telling everyone to Spend, Spend, Spend and then he and Darling find they don't have any more money to spend! This is the position of the Irish Republic - no money to spend - so tax rises and spending cuts are the order of the day. This is what Darling will have to contemplate doing.

Emergency budget heralds tax rises and spending cuts

http://www.independent.co.uk/news/world/europe/ireland-forced-into-a-new-era-of-austerity-1665372.html

"Ireland has set about the dismal business of adjusting to a generational drop in living standards with the end of the Celtic Tiger boom and the prospect of a new era of austerity. An emergency budget, the second in six months, lived up to its advance billing as the toughest in the country's history as the authorities pushed up taxes and curtailed spending to cope with what one minister called a "difficult and desperate" situation."

Andrew64

This article shows just how bad things are in Ireland. We must be prepared for something similar, although I hope the fact that Britain is a much larger economy will get us off the hook somewhat.

Ireland imposes emergency cuts

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5121728/Ireland-imposes-emergency-cuts.html

"Brian Lenihan, the finance minister, outlined a grim package of 1930s-style retrenchment, slashing child benefit and allowances for jobseekers. Road and railways projects will be frozen. There will be a cull of junior ministers save costs. Two-thirds of the belt-tightening will come from tax rises. A pension levy of 1pc – imposed in the face of bitter protests in January – will be doubled to 2pc."

Generali

For any country, the point exists where investors (or The Market if you prefer) won't lend you any more money or at least will only do so at a price that can't be afforded.

At that point the choice is between austerity and Zimbabwean-type policies.

chucknorris

Generali wrote: »

For any country, the point exists where investors (or The Market if you prefer) won't lend you any more money or at least will only do so at a price that can't be afforded.

At that point the choice is between austerity and Zimbabwean-type policies.

Could Ireland default and 'go under' or would the ECB bail them out?

Generali

chucknorris wrote: »

Could Ireland default and 'go under' or would the ECB bail them out?

It's a good question. It wouldn't be the ECB so much as the taxpayers of other EU (Eurozone?) countries. It's a pretty tough sell to an electorate - that their tax money should be used to prop up another Government's spending plans.

Then again I suppose it might be possible to sell it in the same way as the bank bailouts - 'it's bad but the alternative is worse'.

Andrew64

chucknorris wrote: »

Could Ireland default and 'go under' or would the ECB bail them out?

I suspect that if Ireland did default, the ECB would bail them out to keep the Euro stable. But you can be certain that - at the instance of the Germans particularly - there would be IMF-style conditions attached!

dougs

Andrew64 wrote: »

I suspect that if Ireland did default, the ECB would bail them out to keep the Euro stable.

and if they did bail them out, you can bet that a condition of that would be to ensure that they held another referendum on the Treaty and made sure it was a YES vote this time...

Gun to head situation I reckon

JasonLVC

Andrew64 wrote: »

This article shows just how bad things are in Ireland. We must be prepared for something similar, although I hope the fact that Britain is a much larger economy will get us off the hook somewhat.

Ireland imposes emergency cuts

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5121728/Ireland-imposes-emergency-cuts.html

"Brian Lenihan, the finance minister, outlined a grim package of 1930s-style retrenchment, slashing child benefit and allowances for jobseekers. Road and railways projects will be frozen. There will be a cull of junior ministers save costs. Two-thirds of the belt-tightening will come from tax rises. A pension levy of 1pc – imposed in the face of bitter protests in January – will be doubled to 2pc."

These are quite radical actions of the Irish government but at least they are doing what the UK should be doing - swinging cuts in the public sector and quickly - anymore spending (which is what Brown wants but cannot do since BoE called his bluff) by the UK and we'll be "Doing an Irish" as well.

RecoveringAlcoholic

He acknowledged that the country had been badly damaged by the actions of some in the financial sector, saying it now had to be cleansed and repaired.

Away with the[STRIKE] Fairies[/STRIKE] Leprechauns.

Degenerate

Generali wrote: »

It's a good question. It wouldn't be the ECB so much as the taxpayers of other EU (Eurozone?) countries. It's a pretty tough sell to an electorate - that their tax money should be used to prop up another Government's spending plans.

Then again I suppose it might be possible to sell it in the same way as the bank bailouts - 'it's bad but the alternative is worse'.

Wealth transfers of this nature are part and parcel of the integrated economy that should underpin an optimal currency area. Think, for example, of the tax revenues that flow out from London and the South East, or from the east and west coasts of America to support the poor mid-west states. Of course, someone should have explained this to the public of the Euro-zone states before they got themselves into this predicament...

Degenerate

JasonLVC wrote: »

These are quite radical actions of the Irish government but at least they are doing what the UK should be doing - swinging cuts in the public sector and quickly - anymore spending (which is what Brown wants but cannot do since BoE called his bluff) by the UK and we'll be "Doing an Irish" as well.

You talk as if this is the optimal way to manage through a recession, when historical examples have shown it's more like the way to turn a recession into a decade-long depression. The Irish aren't doing this because they want to, they're doing it because being in the Euro-zone has taken away their other policy options and left them with no choice.