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Ireland in the global financial crisis

Ireland in the global financial crisis

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Ireland in the global financial crisis

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  1. Ireland in the global financial crisis Niamh Hardiman UCD School of Politics and International Relations Niamh.Hardiman@ucd.ie

  2. Outline • What ‘variety of liberalism’? • Anglo-American LME… • … with an activist state • Macroeconomic • Social partnership • Industrial policy • Nature of the crisis in Ireland • Banking vs fiscal • Origins of crisis • Political and policy context • Current experiences • An entirely ‘orthodox’ response – why? • Sustainable?

  3. Growth and unemployment shock

  4. Dramatic rise and fall Employment-to-population ratio Eurostat, May 2011

  5. Debt and deficit shock Eurostat, April 2011

  6. Banks

  7. Financial and fiscal crises

  8. Financial and fiscal crises

  9. OECD

  10. Background • Poor banking regulation • Overheating in EMU • House price inflation • Underlying fiscal weaknesses • Thinner tax base • Strong spending commitments

  11. Honohan, 2010

  12. Nyberg, 2011

  13. The House Price Boom and Bust Karl Whelan

  14. Composition of taxation TASC 2010, p.11

  15. Lower reliance on income taxation OECD, Taxing Wages 2007-8 (2009), p.51

  16. Pay-tax trade-offs Source: OECD Taxing Wages 2007/8 (2009)

  17. Honohan, 2010

  18. Explaining crisis • Three bank reports tell us: • ‘Plain vanilla’ speculation • Poor regulation • ‘Herd mentality’ • But • What is this ‘group-think’? • Why such poor accountability? • Why no serious counter-weight? • Actors, institutions, ideas • Political coalitions after 2000: Fianna Fail and banks, property developers, builders • Poor governance, public and private • ‘Orthodox’ economic framework

  19. Choice of fiscal response to crisis

  20. ‘Orthodox’ fiscal measures in Ireland

  21. Fixing the mess: Restructuring the financial sector • Aversion to nationalization • NAMA • Slow recapitalization • New regulatory appointments • Central Bank Governor, Financial Regulator • But old regime in the banks

  22. Big questions • Economic sustainability • Political sustainability

  23. Debt Ratios (EC and IMF Projections) GNP GDP Karl Whelan

  24. Ratings agencies – Ireland

  25. EU, European Economy: the Economic Adjustment Programme for Ireland. Spring 2011. p.12

  26. Unit labour costs – painful deflation Harmonized competitiveness indicators based on unit labour costs, whole economy. ECB, June 2011

  27. Collapse of ‘ruling’ Fianna Fáil party Red C polls

  28. Protests?