Thursday, September 23, 2010

Ireland's economy continues to contract

. . . as noted here. This is further evidence that drastic cuts up front may make economy recovery more difficult and perhaps even counterproductive.

As the British Government considers its plans in next month's spending review, let us hope that it is taking stock of the situation across the Irish Sea. The support for swift and deep cuts now to stimulate economic recovery looks even weaker than before. This is not to say that cuts in government spending should be off the table indefinitely. Instead, it is to say that major cuts should not be on the table now while the economy remains in a fragile state.

UPDATE: I am pleased to learn that Labour shares my concern on the situation in Ireland and the possibility it may take root in the UK if it were to follow suit.


meditations71 said...

Sure, the "cuts now" strategy comes with its own set of risks (and lets not pretend the "cut less and later" does not).

But if you want to make comparisons with Ireland, you must also acknowledge the very significant differences, in economic size, rates set by ECB v BoE, EMU v Sterling, levels of diversification, the overall health of financial/banking sectors, an Irish economy more vulnerable to capital flight and volatile ratings/investor confidence, and on and on.

You simply can't make the leap from another drop in GDP growth in Ireland to Tory cuts in Britain are a bad idea.

The Brooks Blog said...

While there are differences, there are also many similarities. It is quite a leap to think the Ireland case is not evidence against the view that swift, deep cuts will kickstart the economy. After all, it hasn't happened on your island.