Ireland: how not to tackle a deficit and the opportunity it gives to Labour

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Ireland is heading back for recession.

Just a week after Danny Alexander said British cuts were essential to tackle the sorts of problem Ireland had  the crippling impact of the cuts he wants to emulate on the only economy that has been subject to such savagery in recent times has becomeeven more apparent as any sign of growth collapses.

The real lessons are clear. First slashing public sector spending depresses the economy. Second it escalates unemployment. Third it induces private sector decline, a fall in profitability and private sector unemployment. Fourth, the private sector does not flood in to fill the void left by government, it flees.  Fifth, the deficit does not fall as a consequence. Sixth you go into recession. Seventh, you can see no way out of the decline.

That’s what's happening in Ireland.

That’s what could happen here.

It needn’t. It needn’t because this is the excuse Osborne et al need to change track, to say they got it wrong, that the solution they’ve been following does not work. I doubt they will take that opportunity. Deficit hawks don’t want to,. Indeed, as Ireland’s Central Bank Governor said earlier this week, he thinks the answer is more cuts. Which is close to madness.

But someone has noticed: Ed Balls has noticed. He’s said:

These figures are a stark warning to governments across Europe including our own. That is not a credible economic strategy because lower growth and fewer people in work and paying taxes ultimately leads to a bigger deficit, not a smaller one.

It’s an argument made here whilst Ed was still in office. But what the heck? This is an opportunity to say the facts have changed, and their mind has changed with it: to push Darling’s deficit reduction plan into the long grass and to rebuild a new economic policy whoever is party leader this weekend.

it’s an opportunity they have to take.

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