Populists should be wary of risks

Earlier this week, as I waited on the line to do an interview with Waterford Local Radio, I overheard the Independent TD for the constituency, John Halligan, say that 24-hour cardiac services in Waterford hospital would be “a red-line issue” for him in terms of supporting a government.

I can see where he is coming from, because anybody in the city or its hinterland would have to be painfully aware that the hospital is struggling to deliver general health services, not to mention cardiac services.

However, it struck me that every Independent TD interested in lending support to either of the two major parties in a minority government would most likely be on their own local radio stations asserting that some service or other for their area would be a red-line issue.

The unfortunate reality is that all of these red-line issues around the country, as worthy as they might be, will add up to a lot of money.

In an era of scant resources, which we are still very definitely living through, there will not be enough money to go around to address all of the issues that local politicians around the country hold dear to their hearts. Consequently, one wonders how it will be possible, or indeed affordable, to create anything resembling a stable and sensible government.

In the midst of all of the political horseplay and demands, which will be an essential element of any support for a minority government by the many diverse independents, there is a bigger global story.

That story is the still-precarious nature of the global economy, which was highlighted again this week in stark fashion.

In Washington this week, the IMF published its latest update on the global economy.

The revised forecast makes for salutary reading and should act as a stark reminder that whatever programme for government is eventually agreed in this country, the fragile external environment will have a strong bearing on the ability to deliver it.

The reality is that Ireland is a very small and very open economy that is totally exposed to the vagaries of the global economic cycle. We discovered that to our extreme cost from 2008 onwards, and we could well discover it again over the next couple of years. We need to behave prudently.

The IMF is now predicting global growth of just 3.2% this year and 3.7% in 2017. This compares to growth forecasts of 3.4% and 3.8% in January. It is hard to argue with this growth downgrade.

The IMF’s managing director, Christine Lagarde, summed up the latest musings of the IMF with the statement that the global recovery is “too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries”.

The reference to the political fabric should resonate.

Global politics at the moment are quite scary. We have the emergence of forces such as Donald Trump in the US, Ukip in the UK, and Le Pen in France, difficulties in forming a government in Spain, and of course the bizarre manner in which the Irish electorate voted in February. 

You know things are wrong when China is one of the few countries with any semblance of political stability.

The IMF highlights a number of key global risk factors. These include a return of financial turmoil due perhaps to further weakness in emerging market currencies, and a sharp decline in capital inflows; a protracted period of low oil prices could further destabilise the outlook for oil-exporting nations. 

Last week, Africa’s second-biggest oil exporter, Angola, said it would apply for an IMF loan to get it through the difficulties caused by low oil prices.

There are risks from a slowdown in China, and non-economic shocks related to geopolitical conflicts — political discord, terrorism, refugee flows, or global epidemics. The IMF also made strong comments about the negative impact Brexit would have on the UK and global economies.

The analysis looks pretty realistic at the moment. As we seek to negotiate a government in this country, our political masters and political populists should bear in mind the potentially dangerous global economic backdrop.


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