‘Flaws’ in our eurozone thinking

The governor of the Central Bank has said the assumption that being in the eurozone would save the country from macroeconomic trouble was a major flaw in policy thinking.

Patrick Honohan made his comments at the University of Limerick as part of a visit to the city which included a meeting of the Central Bank Commission.

“When Ireland joined the euro it seemed to some macroeconomics that Ireland was no longer an interesting case to study just a region within the euro area, but what those people missed was that it was a sovereign region with its own budget, its own banking regulation and its own implicit back stop for banks,” Mr Honohan said.

“Neglect at home and in Europe of the fact that euro members could still get into macroeconomic trouble despite being part of the euro area was a major flaw in policy thinking in the early 2000s,” he added.

Mr Honohan was speaking at the launch of a publication written for macroeconomics students at undergraduate and postgraduate level.

The book Macroeconomics: An Irish and European Perspective by UL academic Anthony Leddin and UCD emeritus professor Brendan Walsh, was launched at an event attended by Finance Minister Michael Noonan, Mayor of Limerick, Clr Kathleen Leddin and representatives from the wider university community.

The book contains a new examination of macroeconomics that deals with topics relating to economic growth, unemployment and inflation with particular emphasis on contemporary Irish and European economic issues.

According to Mr Honohan, the hallmark of the introductory macroeconomics textbook is the way it analyses all issues from the Irish perspective.

“This new ‘Great Recession’ edition uses current Irish data and draws on the national experience in the crisis,” he said. “If anyone thought that the arrival of the euro would end interest in Irish macroeconomic developments, the events of the past six years has dispelled that illusion.

“A new generation of Irish students will now be armed to help answer the biggest and most challenging economic policy question of today: how to consolidate the return to employment and income growth and manage down the burden of debt.”