Academics warn against cutting austerity measures
DROPPING austerity and replacing it with policies to promote growth would have little or no effect on the economy, a group of academics told an Oireachtas committee yesterday.
Dr John Garvey of the University of Limerick told the joint committee on finance and public sector reform that a possible change in economic policy by the European Union to focus on growth instead of austerity would have only a limited ability to stimulate economic growth in the eurozone.
"There are two problems with doing this. Firstly, who would be the beneficiary of growth policies? It is unlikely the German taxpayer would be happy to pay for growth in the periphery.
"In any case, given the overhanging debts that will still be there, consumers would likely continue to save and pay down debt rather than spend their earnings," he said.
In response to a question from Fianna Fail's Michael McGrath, Dr Sheila Killian said a restructuring of original government bonds would be "much more sensitive" than negotiating over the promissory notes or unsecured debt, "neither of which would be expected to be paid in any case".
Dr Killian added that it was difficult to determine who exactly held most of Ireland's outstanding debt, and said lists of debtholders that appeared intermittently only covered a fraction of the debt.
"Most of these lists only cover between 3pc and 10pc of the bonds that are outstanding.
"The other problem with those lists is the person or institution listed as the bondholder is rarely the ultimate beneficiary of the bonds," she added.