Committee on European Affairs Report on EMU

The Irish have started to discover that austerity measures, as hard as they were, are not enough in order to stay in the Euro. In fact, the cuts have only made the economic situation worse. Time will tell if the Irish will decide to embrace more austerity or will the public force the politicians to try to find another way then pegging their prices level to that of Germany.
As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.
The financial collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.

Now, the Irish are being warned of more pain to come.

“The facts are that there is no easy way to cut deficits,” Prime Minister Brian Cowen said in an interview. “Those who claim there’s an easier way or a soft option — that’s not the real world.”
“Europe is in a tough bind,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a Harvard professor. “If you want to escape default, the Irish path is the only way to go. But the Ireland experience points to the profound challenges that the current strategy implies.”
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
Pay cuts have spooked consumers into saving, weighing on the prospects for job creation and economic recovery. And after a decade-long boom that encouraged many from the previous years of diaspora to return, the country is facing a new threat: business leaders say thousands of skilled young Irish are now moving out, raising fears of a brain drain.
http://israelfinancialexpert.blogspot.com/2010/07/why-euro-crisis-is-far-from-over.html#more

Not a very bold report. They just seem to restate a lot of platitudes.

The real pity is that this debate is happening now, when Ireland has no option other than to stay in EMU. Its a completely pointless exercise to examine the pros and cons of EMU in the current environment.

If this had been done several years back, I would have been heartened to see the engagement of our leaders with this important subject -but now its just serving their curiosity, to no public purpose.

@JTO

you are still based in NI arent you? as in, in another economic juristiction? Just want to be sure….

Why? Its partly true.

I spend one third of my time in Dublin, one third in Belfast, and the rest abroad. But, I consider Belfast to be part of the same political and economic jurisdiction as Dublin, which may complicate the answer to your question somewhat more than people on this site would want to go into.