Sunday 26 February 2017

Did austerity work, or would the economy have improved anyway?

Did the pain we endured really provide the foundation of our precarious recovery - and was it more severe than it had to be? Donal Lynch asks the experts

Donal Lynch

Jim Power, Chief Economist, Friends First
Jim Power, Chief Economist, Friends First

Ireland's recovery continues apace. Last week, the OECD said the economy here will continue its strong expansion over the next two years. The influential Paris-based think tank revised this year's Irish GDP growth figure upwards from the 5pc it predicted in September, to 5.6pc - and said that Irish fiscal policy is expected to exert a smaller 'drag' on activity than in past years.

The European Commission is even more optimistic - it says that our economy will grow by 6pc this year, the fastest rate in the European Union. There is momentum in job creation, consumer confidence has awoken and, crucially, the fiscal outlook of our export partners is good. It appears that we may have weathered the storm and the pain of the last few years may have been worth it.

Economists at the European Central Bank have claimed that austerity measures must take the credit for the position we now find ourselves in, saying policies of the sort imposed by the Troika on weaker Euro-area member states significantly lessens the longer-term pain generally associated with high levels of government debt.

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