Good economics are not producing political success

With a week to go to the election, things do not appear to be going swimmingly for the parties of Government, if the opinion polls are to be believed.

Former US president, Bill Clinton, famously said that ‘it is the economy stupid’.

In other words, if the economy is going well, then political success will follow.

This does not appear to be working for Fine Gael and Labour.

The electorate does not appear to be buying into the economic-recovery story and both parties are struggling to sell it.

To use a sporting analogy, the parties of government are like a soccer team that goes a goal up early in the game and sits back to defend its lead, rather than continue to attack.

Inevitably, the team will concede a goal or two, or lose on penalties.

The recent Manchester United and Chelsea game is a case in point, but at least Manchester United held on to secure a draw, whereas such an outcome is far from certain for the two parties of government.

A comparison of all economic and financial statistics, at the beginning of 2016, would suggest that Ireland is in a much better place economically than it was in February, 2011.

At the last election, Ireland was in a very dark and despondent place, and many naysayers believed that it would take years to get the economy back on track, if indeed at all.

This analysis was wrong.

In 2015, the economy re-attained pre-crisis levels of activity and has, subsequently, added a substantial chunk to its size.

The most recent economic data relating to the third quarter of 2015 show that, on a seasonally adjusted basis, GDP in the third quarter of 2015 was almost 17% above the first quarter of 2011.

The level of GNP, which is in many ways a better measure of activity, was 18% higher.

The greatest success has arguably been achieved in the labour market, which is by far the most important aspect of the economic recovery.

Between February, 2011, and January, 2016, the number of people signing-on on the live register has declined by 122,500, and has declined by 148,482 from the peak of July, 2011.

The number of people categorised as unemployed declined by 121,800 between February, 2011, and January, 2016, and has declined by 141,000 since the peak of unemployment, in December, 2011.

The unemployment rate stood at 14.3% of the labour force in February, 2011; it peaked at 15.2% in January, 2012; and stood at 8.6% in January, 2016.

The total number of people at work increased by 119,100 between the first quarter of 2011 and the third quarter of 2015.

In the third quarter of 2015, there were 139,700 more people at work in the economy than at the bottom of the market in the third quarter of 2012.

The public finances have also improved markedly during the lifetime of the Government.

Ireland entered the EU/IMF programme at the beginning of 2011 and successfully exited at the end of 2013, without a safety net.

The country has subsequently out-performed all of the fiscal targets laid down by our external masters, most notably to have brought the general government deficit down to 3% of GDP by the end of 2015.

The general government deficit was equivalent to 10.3% of GDP in 2011, and this had fallen to an estimated 1.5% in 2015.

It is forecast to decline to 1.2% in 2016 and to move into surplus in 2018.

The government-debt-to-GDP ratio stood at 109.3% in 2011, and 120% in 2013. In 2015, it is estimated to have fallen to 97%, and is forecast to decline to 87% by 2018. It fell below the magical 100% 12 months earlier than anticipated.

This is just a selection of statistics, but, clearly, the story is not impressing the electorate to the extent that Labour and Fine Gael would have hoped.

Granted, Ireland has been the beneficiary of four very benign external developments, but the Government has been instrumental, since 2011, in providing stability and, most importantly, in rebuilding the shattered international reputation of the country.

If they do not manage to sell this story to the electorate, it would represent a political failure of monumental proportions.

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