Ireland vs Iceland
This post was written by Kevin O’Rourke
There were a couple of mentions of Iceland on tonight’s Prime Time. One chap in a vox pop said they were living off food parcels while we were drinking pints. Brian Lenihan stressed that defaulting on seniors would lead to a fate worse than (paying back) debt, namely what Iceland has experienced.
So out of curiosity I went to the OECD’s statistical website to see what the quarterly accounts of the two countries have to say on the subject. I looked up the stats for quarterly GDP, seasonally adjusted, volume index, expenditure approach.
The relative declines of the two economies depend on the quarter you start from. Ireland peaked in 2007:4. Relative to that quarter, Ireland’s GDP in 2010:2 had declined by 13.4%. Iceland’s had declined by 11.8%.
But, to be fair to Ireland, you might also want to compare movements since the Icelandic peak, in 2007:3. Relative to that date, Iceland’s GDP in 2010:2 was down by 16.3%, while Ireland’s was down by 10.5%.
There is a twist in the tail, however. As we all know, GNP and GDP are very different in Ireland (and our GDP data have traditionally been regarded as unreliable because of transfer pricing). Taking Irish figures for GNP (seasonally adjusted, constant market prices) from www.cso.ie, you find that between 2007:3 and 2010:2, Ireland’s GNP fell by 17.0%, slightly more than the decline in Icelandic GDP during the same period.
If you are of the view that we should only be interested in developments since 2008:4, then the declines since then are: Iceland (GDP): 11.6%; Ireland (GNP): 9.9%.
And of course, if you regard GNP as the more reliable indicator in the Irish context, then it is important to note that Irish GNP has been continuously declining since this crisis started. Call me old-fashioned, but I am one of those fuddy duddy types who thinks in order for a recovery to count as a recovery, GNP should actually stop falling. Once again, Iceland and Ireland are not quite as different as the Minister made out during his interview.
As for unemployment, according to the OECD the harmonised unemployment rate for Iceland in 2010:2 was 6.8%. Our rate in July 2010 was 13.6%. I actually think that unemployment is important.
The Minister got very agitated about people suggesting that Irish taxpayers should not in fact pay back senior bondholders everything our rotten banks owed them. An increasing number of these rabble rousers are foreign, it should be noted. For example, the Roubini crowd said today that “we think it unconscionable that bondholders are protected at the expense of taxpayers”. There have been many such sentiments expressed in the international media in the last while. But the bogeyman used to shoot down any such suggestions when they are made in Ireland is invariably Iceland.
It is not such a slam dunk argument as the Government appears to think.