On 7 April, Brian Lenihan, Ireland’s Finance Minister, introduced an emergency Budget. He forecast that Irish real GDP would decline by some 8 per cent in 2009, that consumer prices would fall by 4 per cent (i.e. substantial negative inflation) and that unemployment, already at 11 per cent, would rise further. So what was his solution? Was it a massive fiscal stimulus to boost aggregate demand and turn the economy around? No: it was precisely the opposite. He announced substantial tax increases and cuts in government expenditure? Was this economic madness, or was there economic sense in the measures? The following articles explore the arguments.
Ireland’s shock therapy has got its merits Independent (9/4/09)
Ireland Faces ‘Challenge of Its Life’ BusinessWeek (8/4/09)
Few crumbs of comfort as incomes take severe hammering Irishtimes.com (10/4/09)
Republic’s Budget cuts ‘for the common good’ Belfast Telegraph (8/4/09)
Ireland unveils budget ‘challenge’ Financial Times (8/4/09)
Ireland unveils emergency budget BBC News (7/4/09)
When fiscal stimulus isn’t stimulating: Stephanie Flanders blog BBC News (7/4/09)
Ireland imposes emergency cuts Telegraph (8/4/09)
- Consider the arguments for and against the fiscal tightening measures adopted by the Irish government.
- Should the UK government also adopt a tighter fiscal stance?
- How important is investor confidence in determining the success of a Budget?