His article is here.
Category: Fiscal Policy
Donal O’Mahony provides a robust defence of Ireland’s creditworthiness in today’s Irish Times (article here; supporting Davy Research Report here). Dan O’Brien is more worried. While it is always worth some pause when second guessing the market’s average judgement, I’m inclined to agree with O’Mahony: I believe Ireland can avoid default, should avoid default, and will avoid default.
It is a pity he spoils things a bit with the straw man that many politicians and academics are advocating default.
In truth, foreign misrepresentation of the Irish story is being partly fuelled by domestic coverage. Given the clarion calls of many opposition politicians and academics for a default of Irish liabilities as a legitimate policy “solution”, the self-fuelling impression conveyed abroad is one of heightened insolvency risk.
I don’t see this chorus. Both Fine Gael and Labour were quite explicit this week that Ireland should not default. Even if the reporting is sometimes confused, the bright line between defaulting on sovereign debt/guarantees and allowing non-guaranteed investors in failed companies to bear losses is now well accepted.
The press release is here.
In this new IIIS DP, Agustin Benetrix and I looked at the covariates of the shifts in fiscal outcomes between 2007 and 2009.
The abstract is:
We examine the cross-country dispersion in fiscal outcomes during 2007-2009. In principle, international differences in fiscal policy may be related to differences in optimal fiscal positions, funding constraints, political economy factors and fiscal control problems. We find that the decline in the overall and structural fiscal balances have been larger for those countries experiencing larger increases in unemployment and where credit growth during the pre-crisis period was more rapid. However, there is no systematic co-variation between fiscal outcomes and a larger number of other macroeconomic variables and country characteristics.
You can read it here, with the usual striking photo.