‘We cannot deviate from austerity’

The Coalition should not deviate from the €2bn adjustment planned for next year despite a voter backlash against austerity in last week’s elections, according to the chair of the budgetary watchdog, the Fiscal Advisory Council.

However, Professor John McHale accepted there will be “great difficulty” politically in proceeding with this scale of cuts without a “greater unravelling of support for adjustment policies”.

Speaking at a conference examining the economic, political and social effects of austerity at the University of Limerick, he said Ireland is still in “quite a fragile situation” and the policy of a further €2bn of spending cuts and tax increases “should be pursued”.

“We are on the verge of getting out of the EU’s excessive deficit procedure to get below a 3% deficit in 2015, and the current projection is that €2bn would do that,” said the professor of economics in NUI Galway. “It would be a shame from an economics point of view if that very hard won progress was lost,” he said. “Politically it is going to be incredibly difficult. Our job is not to look at the politics, it is to look at the economics.”

Dr Mark Blyth — author of Austerity: The History of a Dangerous Idea, said the austerity programme pursued across Europe has been self-defeating because it has increased the debt burden of many countries.

Dr Blyth said the “real concern” of European voters has been that the basic institutions of European democracy “are not just being bypassed, they’re being eviscerated, and policies are being run by unelected technocrats.”

Prof McHale said Ireland had no choice but to take the route it did: “The irony is if Ireland hadn’t pursued fiscal adjustments, the country would have been forced into default, and there would have been much greater austerity,” he said.

Professor Philip O’Regan, Dean of UL’s Kemmy Business School, said Ireland has witnessed widespread social consequences as a result of turning private-sector debts into public-sector liabilities funded by the taxpayer.

“Unemployment spiralled but so too have mental health issues, while the return of Ireland’s age-old spectre of emigration has given the lie to historical claims that it was a safety valve — it is an unparalleled human disaster for a country that invested so much in human capital.”