On Tuesday we read that Willem Buiter, Citigroup global chief economist, had stated that “what was needed for the eurozone to become a viable economic entity was fiscal stimulus for periphery countries in exchange for deep and meaningful reforms that would be politically acceptable to the core countries”.
It would be hard to argue that this is anything other than an eminently sensible statement. The economies of the eurozone have been going nowhere fast. Unemployment is stuck in double digits.
Light at the end of the tunnel is still a long way off. Something needs to be done to reduce the level of despair that exists before the proverbial devil makes other uses for idle hands.
Buiter’s solution to the problems of the eurozone is to get governments to increase public spending or reduce the level of taxation in order to encourage and support economic growth.
The first question, as far as Ireland is concerned, is how can a Government that is still borrowing €8bn per annum stimulate the economy?
The second question is how do we get meaningful reforms when our senior mandarins and our politicians are clearly happy with the way things are since they have made no effort whatsoever to seriously reform anything despite pre-election promises?
The economy appears to be doing well but to very many of us that is a matter of perspective. That well-worn cliché used incessantly during the boom years that a rising tide raises all ships has lost its allure as it very quickly became clear that some ships rise far higher than others and some do not rise at all.
Now as the good times return for many there are also many more for whom nothing has improved.
While we are still borrowing €8bn per annum we just do not have the money to meaningfully increase government spending or indeed the luxury of being able to reduce taxation. So is there anywhere else we can get this money from that will help our own economy at the same time that it helps the broader eurozone?
And if that money can be found, do we have the will to ensure it is used for sustainable projects that will stimulate the overall economy and not just certain sectors of it?
We should not forget that we are coming up to an election with a coalition government in serious risk of its candidates losing their election deposits.
The temptation to spend to buy votes would be enormous. However, without reform, without a clear focus on the needs of the economy, the country and the people, knee-jerk stimulus will only generate short-term gains and even then only the few will gain.
Now if we can find a way to reform the way we do things the money can always be found. Let’s not forget that government repeatedly committed before, during and after their behinds found the seats in the government limos, they would get the money back that we expended on rescuing the banks. We were good boys and girls and did what we were told. In return we were told that we would be rewarded. Our debts would be eased.
As we know very often ‘eaten bread is soon forgotten and so it was here. Now we cannot see our European partners for dust. Today Enda Kenny and Michael Noonan are making a meal out of the possibility of getting €29bn or so for the banks but that, unfortunately, is a case of ‘live horse get grass’. Even if that €29bn does make its way back into the exchequer it will be many years before it happens.
If government really wants to have any chance of being in any position to be in government after the next election it should ensure that Europe understand the implications for the eurozone of Ireland being submerged into short term government where the country has to keep going on auto pilot and where every turn could be in a direction none of us want.
However, for this government to snatch victory from the jaws of defeat it will need to get its hands on the ‘reward money’ from Europe and then to use it wisely.
After all, there is nothing like a stimulus to get us all up and moving and most importantly feeling better about our future and about those who facilitated it.
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