The IMF’s Warnings About Government Policy

One of the elements of the recent IMF Article IV report that I found a bit strange were the claims that the Fund had warned the government about its fiscal policy prior to the current meltdown. For instance, the first page of the report states

Various commentators and the IMF in its Article IV consultations did warn that the seemingly-unstoppable growth masked serious imbalances, including the fragility of public finances.

In his Irish Times article on Friday, however, Jim O’Leary correctly points out that the IMF are engaging in some pretty serious revisionist history and makes some very good points about the flaws underlying estimates of structural budget deficits (weaknesses that I discussed in my recent TCD-DEW talk about potential output.)

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A Call to Economic Patriotism

Many have remarked on the negative effects of Ireland’s high price level on our economy. Intrepid Irish Times reporter Orna Mulcahy notes a new and hitherto unreported effect of our lack of price competitiveness and issues a call to economic patriotism:

At the hairdressers they’ve spotted a new trend – customers with homes abroad who have decided to decamp there for most of the summer, rather than the usual two or three weeks.

The word is that it’s cheaper and cheerier to be there – in Portugal, Spain, France, Italy or wherever, than it is to be at home, even if the husband has to commute. Some will only return the day before school begins again, which means that a good chunk of the salon’s cut and colour business is gone for the summer.

This flight of the earners means that their considerable spending power will be exercised abroad rather than at home – a place that’s increasingly seen as downbeat and depressing. This week’s disastrous unemployment figures, and comments that the economy is “banjaxed” (David Begg) and “brutal” (Ibec) may have speeded them on their way.

Paying for a blow-dry and booking another makes me feel positively patriotic.

Moving beyond the economic difficulties of those with second homes in Portugal and Spain, Orna also reports the disturbing problem of a reduction in the selection of Tea Time Express cakes at the Merrion Centre near Ballsbridge.  On a more positive note, in today’s feel-good news story, the Spice burger has been saved.

The IMF versus the 20 Economists?

The Irish Times reports that in today’s Dail debate on the IMF Article 4 report, the Taoiseach said the following

The Opposition has claimed many times that no independent economist supports the Government’s approach to the banks. The IMF is independent, and more expert in advising on banking problems than most commentators, and it supports our approach.

So how out of line is the IMF’s position on banking with other economists who the government has consistently criticised, such as the signatories of the 20 guys Irish Times piece?

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National Bank Rescue Measures

The ECB has released a useful description of the measures taken by each country in rescuing its banking system: you can download it here.

Morgan Kelly on the Irish Banking Rescue

Morgan makes a new contribution in today’s Irish Times: you can read it here.