Wednesday 7 December 2016

So, have we learned nothing from the crash? It seems so

The rules may have changed on fiscal policy but the culture certainly hasn't, writes Stephen Donnelly

Stephen Donnelly

Published 14/06/2015 | 02:30

WARNING: Professor John McHale has warned the Coalition that they are slipping into old budgetary habits of Fianna Fail
WARNING: Professor John McHale has warned the Coalition that they are slipping into old budgetary habits of Fianna Fail

Last week the Irish Financial Advisory Council, IFAC, sounded warnings that Fine Gael/ Labour are slipping rapidly into the old Budgetary habits of Fianna Fail. Having lived through the consequences of what short-term, technically incompetent fiscal management can do to a country, this should set off alarm bells for every man and woman in the Republic.

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Ireland, along with a host of other European countries, has a poor track record when it comes to responsible economic management. The results are bad for everyone - interest rate and price fluctuations, over-indebtedness, and a lack of long-term investment in things like water infrastructure and hospitals. Changes were required to the rules of budgeting, and to the culture in which those rules are used. The implications of the expert warnings in Ireland last week are simple - the rules are not being followed, and the culture has not changed.

The rules started to change in 1993 with the Maastricht criteria. France and Germany were the first to break them. On a side-note, the German establishment has taken a holier-than-thou attitude to the 'peripheral' eurozone countries throughout the recession, but were no fiscal saints themselves. And when condescending to Ireland over the need to pay one's debts (owed in part to German banks), they omit that one reason their economy grew post-World War II was the massive debt write-down and restructuring agreement they received.

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