Ireland: the folly of extreme austerity
The news from Ireland just keeps getting worse. It has just been announced that the Irish economy shrunk by a full 1.2% in the second quarter of this year. All the things that very tough austerity was supposed to bring – market credibility, lower interest rates, economic growth – have proved illusory. The UK’s position is not entirely the same as Ireland but it is striking that Osborne’s script is remarkably similar to Cowen’s (including heavy use of the trick of blaming our problems on the public sector). Let’s hope it doesn’t result in the same implosion of financial credibility and stability.
PS. It is worth noting that the response of at least one influential policy maker to Ireland’s problems has been to say that austerity has not yet gone far enough. Note to the UK’s future: never assume that abject failure will deter a deficit hawk!