The Telegraph have an excellent article on the latest IMF report – “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation” – and what it means for countries trying to make cuts.
In Ireland we cut to quickly. We forgot to bring in a stimulus like other countries. Cuts in budgets mean growth cuts, which will lead to a longer depression.
According to the report Southern Europe (Spain, Portugal, Italy and Greece) and Ireland could be in for an extended recession. With bug cuts coming in Germany and France, they could be joining them, as well as making it less likely for Southern Europe to recover as no demand for goods.
Has the article states:
We are seeing a pattern – first in Ireland, now in Greece and Portugal – where cuts are failing to close the deficit as fast as hoped. Austerity itself is eroding tax revenues. Countries are chasing their own tail.
So what are Governments doing? Cutting more. It doesn’t bode well for the future. We need something to encourage spending, we need something to get other countries to buy our goods. How will we do that? I am not sure, but by leaving out the stimulus we cut too hard and fast. We could be stuck for awhile. This is not good for our government as,
The lesson of the 1930s is that politics can turn ugly as slumps drag into a third year, and voters lose faith in the promised recovery.
Most of the country has already lost faith in the Government and the other political parties are having varying support levels, (see here).
We have no choice but to cut. The deficit is too high. Its that or leave Anglo fall. Maybe that would mean the cuts would not have to be so deep and therefore we would have a fighting chance of recovery. I some how doubt our government will take that chance.
a tip of the hat to Peebles for the link
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