It’s amusing if not a little horrifying to read your anecdote. Change a few words and your describing my hometown in the height the height of the bubble years. Different country but the same human failings.
Add to that the problem of interest rates. The entire Eurozone bar Ireland needed cheap money and the ECB wanted to stimulate spending. So interest rates were quite low. Ireland on the other hand needed to curtail spending. But with no control over our own interest rates we were taking the low European rate. So the main control we had over growth and what could have slowed down the boom were lost to us with the Euro. (Whether we would have had any growth without the Euro is another question though.)
Add to that idiotic politicians who used the cheap interest rates to borrow as much as they could rather than paying down our debt and it was a disaster.
Another reason to stick to Guinness!
I don’t think it helps that - perhaps because of our colonial past - Irish people are fixated on owning property rather than just renting, unlike our continental cousins. Oh, and like in the US - and many other places - banks were far too generous about lending to people who had no business borrowing in the first place.
Personally, I’m a bit of an optimist. I think a bail-out is inevitable and our international reputation will take a bit of a battering but it will recover over time. From a day to day point of view, I don’t know what’s in store - I’m in a reasonably secure position so I’m fairly confident that I’ll be able to keep my head down. There’s a fairly severe budget coming in December so I’ll probably come out with less in my pay packet but I’m not sure how drastic that will be - we can’t stimulate the economy if no one has any cash, after all. There are other measures rumoured to be in the offing like an annual property tax that I’m not too hot about, having paid out a sizable lump in stamp duty last year.
I’m not that worried about our corporate tax rates being increased as a condition of the bailout - after all, the only way we can pay back any money we take is if our economy actually recovers and that’s not going to happen if we can’t attract investment.
The consensus seems to be that if we do take a bail-out, the strings won’t be much more severe than what the government had been planning anyway - in fact, the impression I get is that the pressure from Europe for Ireland to apply for a bail-out is more to do with a need to calm the bond markets and prevent our woes from spreading to Portugal and then Spain (which would be catastrophic for the Eurozone) than from a lack of faith in our ability to deal with the crisis. Essentially, the bailout is primarily intended to save our banking sector more quickly (and cheaply) than we’d be able to ourselves - that way the bond markets yield will reduce and Portugal/Spain will be able to borrow money more cheaply.
I’m by no means an expert on this though and I could have it competely arse about face.
I’m not understanding you. There’s nothing in that report about the fourth quarter. How could there be when we are still in the fourth quarter? Are you confusing the 0.5 increase in GDP on the last quarter (the highest increase in the EU) with the 4.7 annualised GDP (highest in the EU) for last quarter?
That high-growth third quarter had Estonia’s unemployment rate at 15.5%. I’d guess the much slower fourth quarter drove it up again, but I can’t find anything.
There’s no “much slower fourth quarter”. The unemployment rate hasn’t shot up. It’s fallen by over 3% in the last three months.
Krugman was basically saying that Estonia should give up the Euro in order to save its economy, and yet Estonia is joining the Euro next year and its economy is going gangbusters.
Most analysis seems to suggest that he is just lumping Estonia in with Latvia, rather than having a fundamental misunderstanding of economics. But this was maddening enough for the Estonian finance minister to claim that Krugman “couldn’t find his ass with both hands”.
If nothing else, this thread prompted me to look at a map and find out/confirm that the 3 Baltic states are, conveniently enough, in alphabetical order from north to south. Now I’ll be able to identify them on an unlabeled map and impress people at parties.
The history of the Euro and Germany is pretty interesting. They had severe concerns that (rightly) held things up for many years concerning questions exactly like this. My understanding is that key German economists were exceedingly wary of tying different national currencies together and not having all of their monetary tools available, basically resulting in less robust economies pulling them down. So some parts in the compromise to get Germany on board with the Euro (without Germany it would not have happened) were the location of the bank in Germany, their de facto primacy in leadership even when they don’t have the presidency, and their insistence on certain terms of admission to new countries such as debt ratios, etc.
Sadly no one foresaw “what if” scenarios, such as “what if” we admit a country that cooks the books to get in? There are no provisions for booting someone out, sanctioning the country to reform, or anything else. The tied currency ties everyone’s hands together.
The biggest factor that’s coming home to roost (apart from Financial Institutions mismanagement) is that fact that for years the interest rates in Europe were set according to the German/French economies. Now you have the likes of Portugal, Spain and Ireland in trouble because it ran contrary to what perceived wisdom would have done for us.
Ok, I don’t know what that fourth quarter article was about. As to Estonia growing like gangbusters - a single quarter of 5% annualized, and an unemployment rate still at 15%?
Most analysis seems to suggest that he is just lumping Estonia in with Latvia, rather than having a fundamental misunderstanding of economics.
If you say so, I can’t find shit about it. Estonia’s still has an unbelievably shitty economy though; their fantastic turnaround isn’t yet.
Ok, I don’t know what that fourth quarter article was about. As to Estonia growing like gangbusters - a single quarter of 5% annualized, and an unemployment rate still at 15%?
Are you reading anything before replying? This isn’t just a “single quarter” of growth. Estonia exited recession last year, and has been growing every quarter. The growth has been increasing. The GDP growth and increase in growth has been beating out all or most of the other EU nations every quarter of this year.
Their “fantastic turnaround” was already noted earlier this year, in February, after Krugman’s words were denounced by economic commentators across the board, including the Financial Times which I have linked you to before. Back in February the FT already noted Estonia’s “fantastic turnaround”, pointing to, among other indicators, its stock market, which had grown 47% in 2009, and another 38% just in January of this year.
Estonia’s still has an unbelievably shitty economy though; their fantastic turnaround isn’t yet.
This is a country that is beating out other EU nations in terms of growth and increasing growth. It’s managed this while not devaluing its currency. It will become the first former Soviet nation to join the Euro in a couple of months. It has achieved all this while increasing its budget surplus.
And you call this “an unbelievably shitty economy”. What planet are you living on?
Are you just mad that they are proving Krugman wrong or something?
Heh, I wonder how long it is before Estonia regrets joining the Euro. I suppose many of the other confederal benefits of the EU are good though.
What’s their unemployment rate again?
It’s 15% and falling. That’s without running up a huge deficit to lower unemployment rates. The US unemployment rate is 10% after massive deficit spending. If Estonia ran up a huge debt they would have a lower unemployment rate, but it’s looking like they have managed to turn the corner without needing that.
Estonia is a tiny country that has only recently joined the free market economy. They have few natural resources, and so were not in a strong position to deal with the wrenching changes brought about by a global recession that was not of their making.
They ran a tight ship for years, only to be battered by profligate neighbours and investors running scared because, like Paul Krugman, they couldn’t tell the difference between a basket case (Latvia) and a well run government (Estonia).
They saved in the good times, and reacted quickly and smartly in the bad times, and have achieved more than any of their fellow Soviet states: recognition by the EU that their economy is strong enough to join the Euro. And that in a time when the EU has become far more scrutinous of new members in the wake of the Greek debacle.
Despite all this you say they have an “unbelieveably shitty economy”, and your only defence is that they haven’t massaged their unemployment figures with jobs bought on borrowed money. Do you really want this to be how people judge the level of your global economic wisdom?
What, exactly, are those 15% unemployed people doing right now? Enjoying their unpaid vacations?
We’ll see what happens next quarter.
While you are waiting for the facts to change to prove you right, you can read Bloomberg’s The Baltic Exception.
An interesting counterpoint from Marc Coleman on the BBC.
"[b]Images of people riding on donkeys or begging, together with one-sided dramatised narratives about young people leaving the country (our population has continued to grow well into the recession) may boost viewership, listenership and readership figures.
But they convey an image of Ireland totally at odds with the reality of a country that last week was voted by the UN human development index as the world’s 5th most desirable place to live.
The UK was - sorry to point this out - 26th. Our GDP per capita remains 30% above the EU average and well above Scotland, Wales and Northern Ireland.
And, unlike France, we are a country where - without riots - we can create agreement between our political parties on the need to get our house in order.[/b]"
Bank run rumors.
What Mortimer-Lee is getting at are the rumours of a run on Irish banks. I wouldn’t call these runs yet. But clearly this is the scenario we want to avoid. Mortimer-Lee is talking about depositors though, not just non-depository creditors. That is significant in my view. Europe’s dithering is making this a possibility, though.
More from the Great Satan.
Ireland overspent in the soap industry, uselessly including TWO deodorants in every bar of Irish Spring.
So, the British are feeling smug about not joining the Euro? I’ve always admire their courage to resist the Union. Turns out to be a wise choice!
Is the UK really doing better out of the Euro? Before the financial crisis the British were crowing about the “Anglo-Saxon” way and urging the Germans and French to follow suit. Since the financial collapse the UK was hit more heavily, and recovered more slowly.
Would the UK have been better in the Euro? It’s hard to say. They have more control outside, but we are also more vulnerable - Sterling has been battered. Certainly it’s impossible to say that we have been better off outside of the Euro.