Tag: budget deficit

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Fiscal prudence or fiscal madness: the recent case of Ireland

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)

Questions

  1. Consider the arguments for and against the fiscal tightening measures adopted by the Irish government.
  2. Should the UK government also adopt a tighter fiscal stance?
  3. How important is investor confidence in determining the success of a Budget?
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Budgeting for a deficit

The Budget 2008 was quite an under-stated affair, but was the first delivered by Alistair Darling as Chancellor. As ever, many of the changes had been announced well in advance, reducing the element of surprise. But the Budget remains an important event. Note that the Budget websites can also be useful reference sources for economic policy changes.

Budget 2008 Guardian Budget Special
Interactive: Budget 2008 Guardian (11/03/08)
What to tell us on Budget day: where our money is going and how it can be stopped Guardian (10/03/08)
Budget 2008 BBC News Online Budget Special

Videos and podcasts

Old Mother Hubbard Guardian (13/03/08)
Budget speech in full (Video) BBC News Online (12/03/08)

For details of the Budget measures, you may want to look at:
Budget 2008 HM Treasury Budget pages HM Treasury Budget microsite HM Treasury (March 08)

Questions

1. What are the key changes in the Budget? What effects are they likely to have on the economy?
2. Assess the extent to which this Budget can be considered a ‘Green Budget’.
3. How has the Budget changed the overall fiscal position of the government?
4. Discuss the likely impact of the Budget on small and large businesses.