Report on Macroeconomic Policy and Effective Fiscal and Economic Governance

The Joint Oireachtas Committee on Finance and the Public Service’s report on a new fiscal framework is now available.   It can be downloaded here (MS Word file).   Unfortunately, Philip Lane’s background report for the Committee does not appear to be available for download at this time.

Update (from Philip): The full report (including the background paper that I prepared) is now available in PDF here.

10 replies on “Report on Macroeconomic Policy and Effective Fiscal and Economic Governance”

Too little, too late. I did, however, expect a more elaborate bolting of the stable door after the horse had escaped. But, no matter; the process in future will be dictated by Brussels – and we may, sometime down the road, if we’re very, very good, be allowed to set the parameters.

There is another course of action possible, namely the adoption of the Austrian Economic model which would proclude the following:


Looks to me that Irish government faces a stark choice. It can:

a) save the economy, or

b) save the euro

but it can not do them both. Equation where all sectors of the economy (government, companies, households) all try to save at the same time just is an impossibility, when export sector cannot be counted on as a savior.

Borrowing in own currency would always be possible, because markets understand that sovereign currency issuer cannot ever default on debt nominated in it’s own currency. Even more amazing is the fact that it would be possible just to issue the currency and allow private sector pay down their debt without accruing huge levels of public sector debt.

So the stark choices are either to commit economical harakiri or do the only sensible thing to do and re-gain currency sovereignty. At least second option should be kept as viable plan b in case if the other one is tried first and it fails miserably.

Dear Irish economy bloggers
Scaremongering has just started about what the IMF would do if they came in “depsoit-grabbing”, etc.
I think it would be really helpful if you guys set out informed views on what is likely, why Ireland (bad and all as it is) wouldn’t be like Argentina, etc before somone starts an old-fashioned bank-run!!


@Paul Hunt.

Too little, too late. I did, however, expect a more elaborate bolting of the stable door after the horse had escaped.
Well said.
I read the summary recommendations and can honestly say that it is the greatest load of woffle I have have read in a long time.

Not one mention in all of it, that we are presently in Fiscal LaLa land.
How would a better economic modelling system help us now or indeed a few years ago or an independent review for that matter.

The Bubble and the policies driving it were well criticised. McCreevy, Bertie, Cowen, Harney went ahead anyway and bust the country.
They believed their ideology. And they were right. It serves all of them wonderfully. They are all rich now.

Congratulations to the Committee for producing an excellent report. It holds the promise of substantially improved fiscal policy in the future. We are also very fortunate to have in Philip one of the world’s leading experts on fiscal institutions available to advise the committee. International expertise and intimate knowledge of the Irish case all rolled up in one person!

Although the main focus in on the conduct of fiscal policy in the future, the proposals (as Philip notes in his conclusions) are potentially valuable in building credibility around the four-year plan. It is encouraging to hear Minister Lenihan’s broad endorsement, and his apparent willingess to use a least a version of the proposals in developing the four-year framework and plan (link to Irish Times report below). Furthermore, it is encouraging to see both Michael Noonan and Joan Burton so closely involved in the exercise.

In sum, the work of the Philip and the Committee provides a critical input into making the four-year plan (and upcoming budget) the “game changer” that we need.

Listening to the V Browne show and again the issue of the pension fund to keep the debt wolf from the door comes back as a issue to be discussed.
We do not and cannot use this money to pay down debt as that will accelerate the depression neither can we just spend it directly – we need to multiply it via fractional reserve principles.

It seems amazing that such a esteemed quartet cannot envisage the creation of credit.
To create a fig leaf of state distance we can use the 20billion + pension fund to create a deposit.
This can be used to create a .5% loan to provide another fig leaf of debt money and then we can issue it.
For example we can employ construction workers to provide insulation at lets say a cost of 100 Euro per house and the owner need only pay a token 50 cent for the service.
Even people who are of limited means and are reluctant to spend will I am sure pay .5% of the cost of installation.
At no cost to the state and a token cost to the customer we can inject currency into the economy.
As the money supply builds again people can begin to pay down their debt.
I have heard of a Industrial bank proposed by the labour party but assuming a money multiplier of ten then we need maybe 10 billion of a deposit base to create 100 billion as their proposal seems too conservative.
The ECB and BOE cannot directly interfere if we use a plausible excuse of our money although I suspect they will not like it as it would threaten their monopoly – the citizens of the state can begin to pay off their debts at lower cost.
I suspect the only motivation of austerity is to keep the price of debt money low relative to PMs but the price will have to rise anyway – maybe they don’t have the money they say they have ?

Ps listened to Jim Power state that this state cannot take a stimulus !!!!!!

What absolute nonsense from the man – there is spare capacity all over the shop.
What economics course did Jim attend ?


Good point! Why would anyone but a fool have money on deposit at the interest rates, given the markets view of the government?

Argentina confiscated most of their deposits. The middle class did howl!

They are safe for the moment. But in a few months time, it might be wise to accumulate cash and keep it out of the banks, ahead of the crowd. One figure they keep an eye on is notes in ciculation. If these rise, then the trend is established: inside knowledge ahead of catastrophe?

Keep an eye on that figure, my unknown friend! Action will be taken before a run on the banks. I doubt it will be to allow immediate repayment of funds. Most bank accounts have irksome little conditions like a weeks notice! Once that is enforced, as it is in some American banks at the moment, then confiscation is a threat! More likely is conversion into bonds!

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