Grim Economic forecast belies election 'commitments'

Wednesday April 24, 2002 19:57

by GluttonMan

What economic situation will a new government preside over?

Recently released reports from the ESRI taken in conjunction with unsubtle signals from IBEC indicate that any government elected may have won the privelege of presiding over the next economic disaster.

The ESRI (http://www.esri.ie ) has released its spring Quaterly economic report. One of the papers is quoted in today's Irish Times editorial ( http://www.ireland.com/newspaper/opinion/2002/0424/1387436763OPLEAESRI.html ) to suggest that "public spending should be reigned in". The ESRI's report suggests that any government that continues the modest pay "deals" and health infrastructure "commitments" will be EUR727 million in debt. This is before we even get the daily champagne breakfasts that are being prepared for us even now by our representatives.

When this report, with its talk of "inflation" (by which they really mean pay increases) is combined with recent reports of IBEC's unhappiness with the "wage restraint" which we've allowed to be imposed upon ourselves then the scene is set for either capital flight as the government tries to raise money for our cancer treatments, or else capitulating to another "boom" during which we get not to own homes or get treated for our illnesses.

One of the ESRI papers in the Quaterly report ( http://www.esri.ie/PRESSRELEASE/QEC0302_PRESS.HTM#Is%20The%20Celtic%20Tiger%20A%20Paper%20Tiger
) raises some interesting questions about the assumptions behind this kind of thinking. Professor Cormac Ó Gráda (UCD) suggests that

"The timing of the decline of the share of the economy taken by the public sector means that it is more a product than a cause of the economic expansion."

In other words, the calls to reduce public spending to stimulate the economy may be bogus.