Senator Sean Barrett has been working away in the Seanad on a fiscal responsibility bill to interlock with our other EU/IMF commitments. The government has responded to Senator Barrett’s bill here, it’s worthwhile having a read of this together with the contributions by Karl and Colm on this site.
Author: Stephen Kinsella
Senior Lecturer in Economics at the University of Limerick.
Sorry, couldn’t resist.
The quarterly national accounts are out, and it is not pretty. The domestic economy has contracted, quarter on quarter, by 2.2%. Things look even worse when looking at the components of GNP. From the report:
Personal Consumption (-1.3%), Government expenditure (-1.3%), Fixed Investment (-20.9%) and Imports (-1.5%) decreased on a seasonally adjusted constant price basis between Q2 and Q3 2011 while Exports (+0.8%) increased over the same period.
You can see the change in the figure below for GDP and GNP. Combined with the unemployment figures Kevin highlighted earlier this week, the picture is far from good heading into the holiday season.
Luckily we have the omnipresent Little Mix to cheer us up. I’ve heard the, ahem, song, 5 times already this morning. And I feel much, much better about things. Really.
Tom Sargent’s Nobel lecture compares the formation of the US fiscal and monetary union by Alexander Hamilton to the current experience in Europe. Well worth watching, given the day that’s in it with a series of moves towards, ahem, fiscal union, in Europe. Sargent’s lecture is based on this paper.
Paul Krugman links to this New York Times piece on Ireland’s recent experience with austerity, which reminds me to link to something Seamus Coffey wrote recently on exactly how much austerity we’ve endured. Seamus goes beneath the headline 21 billion and looks at where cuts have actually (or probably actually, this isn’t an exact science) happened. He finds the figure should be closer to 10 12 billion euros.
Krugman’s point is more basic than Seamus’, because most of the people reading this blog in Ireland probably know the difference between GDP and GNP in our context. Here’s the monthly economic bulletin (.pdf) from the Department of Finance. We can see the difference in GDP and GNP right away from the table I reproduce below which shows percentage changes by quarter. We can also see the effects on the elements of GDP and GNP here.
Here’s a long-ish opinion piece I wrote for Foreign Affairs.
Let’s define austerity as a sharper than expected drop in government expenditure and a sharper than expected increase in taxes by a government experiencing a large budget deficit. To date there have been about 21 billion euros in austerity measures enacted in Ireland, with about the same amount to come in the future, and not a single riot.
The scale of austerity in Ireland must give Foreign Affairs readers pause. At the scale of the United States economy, this is the equivalent of shutting down the US Department of Defense. Italy is facing into a period of austerity as well. What can they expect?