Ireland’s austerity package is built on hope, but nothing else.
I’ve already noted that it will rile the whole of Europe because there’s no move on corporation tax. But it’s then fascinating to note that Business Insider says it won’t work either:
Then there's the fact that all of the revenue hikes are to fall on the backs of consumers and retirees (there will be a hike in pension-related taxes) and not on corporations or banks, which may be inevitable, but it's the kind of strategy that will flip out the public street and cause riots.
I didn’t say that.
Sober business journalists did.
But they’re right.
Just as they’re right to point out that believing Ireland will grow whilst suffering these cuts is plain daft and hoping that’s its cost of borrowing will fall to 4.4% is just plain crazy.
Sure the Ireland can pass this budget.
But they can’t deliver it.
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First – Returning taxation levels to 2006 levels is hardly likely to cause ‘riots’ and the Irish have shown generall that they’re not generally ones for large scale protest. We want an election above all.
Second – the point of this is to raise revenues. How, pray tell, will jacking up the corporate tax rate do that given that we’re already facing problems with capital flight? (Additionally Europe seems to accept that the corporate tax rate won’t be moving.)
Third – its hugely uncertain as to whether we’ll grow, but that’s a while away from daft and crazy.
Now I say all of this, again as someone who is hugely unhappy and sceptical of this plan, and wants debt relief. I still think thats the eventual outcome.
@Daragh McDowell
1) yes it is
2) oh dear – you mean it’s returning from where you stole it?
3) no there’s not a hope – don’t kid yourself
I agree – default is inevitable
Richard
1) Given that in the depths of this crisis the closest we’ve seen to a riot is a few hundred of the usual SF suspects causing a ruckus, I stand by analysis. While your appearance of actively welcoming large scale social breakdown is disturbing, I predict you will be disappointed.
2) Oh FFS – so if a country A provides more favourable business conditions than country B, country A is guilty of theft? Is Argos guilty of theft from Curry’s because it sells electronics at a cheaper rate. We’re a sovereign nation and entitled to set tax rates at whatever level we please, and do business with whatever companies want to do business with us.
3) Given that we’ve had some, if not stellar, growth during the last two years of cuts and manufacturing activity is in fact on the rise I don’t necessarily share your pessimism.
Default is probably inevitable under these conditions – which is why I hope that as soon as a new government comes in, probably within the next few weeks, they’ll push for a larger haircut for bondholders. Which they’ve already indicated they will in fact do.
[…] in Ireland and the UK are fightened and gross injustice is planned in both countries. I’m not alone in thinking this could lead to trouble. In which case now is the time to change policy, and not the […]
@Daragh McDowell
If Argos runs out of cash because of their policy of underpricing Currys, should Currys be expected to lend to them?
Why shouldn’t Currys leave Argos to borrow at much higher interest rates?
Perhaps Currys is happy to lend because default will give access to assets at a later date?
Who knows what the motives are? – but the story being presented doesn’t make any sense – not to citizens; not to bond traders.
Is there a pattern emerging? I believe both Greece and Spain responded to the finacial crisis with austerity measures. Ireland did as well. I don’t know how Portugal responded at the time, but public sector workers were on TV yesterday complaining of repeated wage cuts.
@Daragh McDowell
1) I don’t want riots. I don’t condone them. I think they;re likely. That is analysis
2) No you’re not – you have international obligations too – don’t ask for bail outs and ignore why you’re in the mess
3) GDP or GNI? GDP I suspect – no benefit to Ireland at all
It’s rare that I agree with you Richard, but surely the ECB and IMF can see that these bail outs are doomed with such unrealistic growth forecasts.
Default is inevitable, yet the longer it takes the more painful it becomes. If we continue to see bail outs, then the demise of the Euro will surely follow (which I actually think is a good thing, but that is another matter).