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May 16, 2010


Aidan R

Excellent analysis Michael. It would appear that those who support a cut and burn strategy blame the increase in the cost of our borrowing on 'bad luck' brought on by the 'Greeks'.

Colm McCarthy wrote in the Times a couple of weeks ago:

"While Ireland has no immediate need to borrow again, it must return to the markets in due course, and there is now a risk that it will face higher borrowing costs. This is unambiguously bad news, and a piece of bad luck since the decline in Irish spreads, a recognition of the early and sustained efforts to rein in the budget deficit, has now been reversed"

He then goes on to argue:

"Ireland’s vulnerability has, through no particular fault of ours, increased substantially these last few weeks.....The benefits of firm budgetary action through 2009 are evident – Ireland has had to pay less interest abroad because of these actions".....

So, it is no longer a strategy of blame the Irish public sector but blame the Greek public sector........You couldn't make it up.

Whatever about Irelands 'capacity' for fiscal consolidation - it is clear that the cut and burn strategy(regardless of ones ideological preference) is simply not working. But, facts - if they get into the public sphere - rarely speak louder than political ideology.

Eoin O'Mahony

Anyone else think that bond markets have just become totemic? "the markets must be pleased! sacrifice education!"


Sure looks like it Eoin.

Michael, what's mightily depressing is not that there are no alternative viewpoints - there are as you continue to demonstrate, but that they're now so completely ignored. It's almost literally as if some have their fingers in their ears and hum loudly for fear that they might actually have to engage.


Hats off to you again Michael.


Idiocy of unnamed-but-all-too-obvious commentators aside, I get the sense that I'm missing the point here.

Could it not just as easily be the case (and I think this is more likely) that Ireland's cost of borrowing, while increasing, has not increased as much as it would have without cuts? The market's response to cuts is not binary, and it could well be that Ireland's cost of borrowing would be well, well above what it is now were those cuts not put in place.

Correct me if I'm missing something here.

Michael Taft

Pidge - whether Ireland's borrowing costs would have been higher had it not been for the cuts may be right or it may not be; this depends on what means by cuts. If regressive tax expenditures had been cut, had investment programmes designed to get people back into work been implement (cutting unemployment costs, increasing tax revenue) - given that this would have been a more rational approach, I suspect our borrowing costs would have been lower, since it would have been more successful.

However, the point of this article is not to argue that toss - merely to point out that many commentators here are making unsubstantiated statements re: international markets, when the fact are available to all. To concede this point would mean serious questions would be asked of the assetion: 'the markets are treating Ireland differently, more kindly, because we are doing what the markets want us to.' Apparently we're not - if the 10-year spread is anything to go by.

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