It is now almost four years since Ireland entered the troika programme and is almost a year since the programme was exited.
Depending on one’s perspective, one of the downsides of entering the programme was that Ireland will be subject to ongoing surveillance from the bodies that lent us the money we needed to run the country back in 2011. This will last as long as the money is still owing. Personally I think it is a good thing given the marked inability we have shown over many years to run our affairs in a proper and prudent fashion.
The latest surveillance exercise by the European Commission, the ECB, and the IMF was completed between November 17 and 21. The results were published late last week.
While acknowledging that the economic situation has continued to improve and the the recovery is broadening, the European partners expressed concern about the sustainability of the current export performance; government efforts to stimulate lending to the SME sector; the necessity to reap additional efficiency gains and better control of health expenditure without compromising healthcare delivery; long-term and youth unemployment; high levels of private debt; and the still high level of government debt and borrowing.
The basic advice is that despite significant progress, the macro-economic adjustment process needs to continue and that significant challenges remain. Furthermore, our European partners are not terribly happy about the change in fiscal stance signalled by the recent budget and the advice is that the Government needs to stand ready to adopt additional measures to address potential future fiscal risks. In other words, if there is any slippage on the fiscal targets, further revenue enhancing measures and cuts in government expenditure will be required. The OECD expressed similar views this week.
All other things being equal, this advice has merit. However, all other things are certainly not equal at the moment. The Government parties are being decimated on the water charges issue. While the water charges themselves are tiny in the context of the massive fiscal adjustment that has occurred since 2008, they represent the straw that has broken the camel’s back.
If the opinion polls are to be believed, then the Government looks to have a slim chance of getting back into power. The only hope it has is that another year of economic recovery and another expansionary budget next October, with the promise of more to come, might just convince the electorate that the Government is worth re-electing. If the party riding high in the polls now, and a raft of disparate independents were to form the next government, then there is every chance that our European partners would be told to take a running jump. Given the raw deal we have got from Europe in relation to the bank debt, even seemingly sensible people might just welcome that.
I often wonder what planet our European technocrats occupy. If the current government was forced to implement further austerity there would really be a revolution and the government parties would be banished to oblivion.
When I studied economics in college many moons ago, it was called Political Economy. It was a good title and recognised the reality that politics are every bit as important as economics. The European technocrats who issued the advice to the Government last week clearly have no understanding of political realities. Austerity as a creed has passed its sell by date in Europe, but if the powers that be continue to push this agenda then it will only accentuate political movements in Greece, Spain, Ireland and France, who are not as enamoured with the whole European project as the more traditional parties of the past.
If external bodies to whom we owe money force us to implement further fiscal austerity, it would prove calamitous for the economy and for the political system.
The mantra on fiscal austerity across Europe needs to change, not least due to the dire economic circumstances in the eurozone, but more particularly against a background of deep disillusionment with the whole EU project. The European technocrats should be careful what they wish for.
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