Rossa White is today’s contributor to the Irish Times series: “The Time to Take Hard Decisions on Public Pay is Now“.
He concludes by advocating a new system that will avoid fiscal procyclicality in the future, through a ‘golden rule’ policy, plus the establishment of a rainy-day fund.
Institutional reform along these lines is highly important. Indeed, I post a link below to a 1998 article I presented at Kenmare and published in the now-defunct Irish Banking Review, in which I advocate a similar approach. However, I wonder about the political incentives to establish such institutional restraints on the conduct of fiscal policy. Again, the current crisis may provide the right environment for undertaking such reforms.
Philip R. Lane, “Irish Fiscal Policy under EMU,” Irish Banking Review, 1998.