Ireland forced into a new era of austerity

Generali

Degenerate wrote: »

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...

It's not the same thing though is it. The Euro is an area with a single currency and monetary policy, not a single fiscal policy.

Even those fiscal rules that were drawn up at the start were almost immediately broken without real sanction by the French (and Germans??). IIRC, it also turned out that the Italians lied about their fiscal position to get through the Maastricht(?) Criteria.

How would you feel about your tax money going to bail out Irish Government spending while your kids' Schule had vacant teaching posts or badly tended playing fields? Or perhaps while Grandmere Degenerate sat on a waiting list to see a cancer specialist?

Radiantsoul

Degenerate wrote: »

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.

Exactly.
I wonder if the Irish will reconsider the benefits of being in the Eurozone again.

Sir_Humphrey

Irish unemployment is over 10%, even before these swingeing cuts and large tax rises (funny how the Tories here forgot to mention that bit).

The public spending cuts will further shrink their tax revenues and tax base, so reducing any effect on their deficit. This will increase Irish unemployment further. I think things might be about to get very nasty over there, politics-wise.

Still, at the least the UK will get chance to get an idea what would happen if crazy deflationist policies were implemented here.

Sir_Humphrey

Generali wrote: »

How would you feel about your tax money going to bail out Irish Government spending while your kids' Schule had vacant teaching posts or badly tended playing fields? Or perhaps while Grandmere Degenerate sat on a waiting list to see a cancer specialist?

If I worked in Germany, I would want someone to be able to buy my products, whether Irish or German.

Generali

Sir_Humphrey wrote: »

If I worked in Germany, I would want someone to be able to buy my products, whether Irish or German.

My belief is that it would be a very hard sell to the German electorate that their taxes should go to be spent by the Irish Government. Do you really think otherwise? I'd love to know how you think that could be sold politically.

Degenerate

Generali wrote: »

It's not the same thing though is it. The Euro is an area with a single currency and monetary policy, not a single fiscal policy.

Which is a Frankenstein creation. I was merely pointing out how a single currency area should function, to actually work. I'm not saying a single currency was ever a good idea, just that if you have one, regional wealth transfers are part of the necessary apparatus. Much tighter central control over regional spending is also required.

How would you feel about your tax money going to bail out Irish Government spending while your kids' Schule had vacant teaching posts or badly tended playing fields? Or perhaps while Grandmere Degenerate sat on a waiting list to see a cancer specialist?

Don't get me started. We already have this sort of unfairness in the UK. Barnet Formula anyone? Free education for all Scottish people, etc.

luvpump

Generali wrote: »

My belief is that it would be a very hard sell to the German electorate that their taxes should go to be spent by the Irish Government. Do you really think otherwise? I'd love to know how you think that could be sold politically.

Personally I feel this whole mess has quite a way to go befor it completely unravels, I wonder if the Irish situation..Amongst others.. could bring about the downfall of the Euro ?

Sir_Humphrey

Generali wrote: »

My belief is that it would be a very hard sell to the German electorate that their taxes should go to be spent by the Irish Government. Do you really think otherwise? I'd love to know how you think that could be sold politically.

It is a difficult sell, but either foreigners buy German goods, or Germans buy German goods. The flipside of Ireland and the UK having an excessive trade deficit are Germany and China having an excessive trade surplus (up until the credit crunch).

The same difficult sell comes from avoiding heavy protectionism and "beggar thy neighbour", but that does not mean they are not the correct policies.

EDIT: Post 1000!

Radiantsoul

luvpump wrote: »

Personally I feel this whole mess has quite a way to go befor it completely unravels, I wonder if the Irish situation..Amongst others.. could bring about the downfall of the Euro ?

It seems it would take a lot of political capital to unwind the eurozoen. Conceivable Ireland or Holland might leave, but the Eastern European nations are likely to be more desperate to get in. And the big countries(Germany and France) are likely to want to keep it going.

Probably it means another generation of navel gazing by Europe as so much time is involced in arriving at a better system. This probably means the USA will continue as the dominant world power for some time(China probably has too many social problems to overcome imho).

Wookster

Generali wrote: »

My belief is that it would be a very hard sell to the German electorate that their taxes should go to be spent by the Irish Government. Do you really think otherwise? I'd love to know how you think that could be sold politically.

It is a major issue in Germany - the idea that they will have to pay higher rates on Bunds as a result of other Eurozone members f ecklessness.

And too right!

If I was a German who had seen his country make painful sacrifices to become competitive on the global market why should I subsidise, what I could perceive as lazy gits being fe ckless.

The simple answer is I wouldn't, not when they have had so much time to adjust and have not bothered.