Chasing deficits 'takes us in wrong direction'
PURSUING deficit reduction at this time will take economies in the wrong direction, one US economist told a conference in Dublin yesterday.
Lawrence Mishel, president of the Economic Policy Institute thinktank, said the US policy debate has been hamstrung by misguided ideas about deficits. "Job creation must come first and is not in opposition to prudent fiscal policy," he said at the annual conference organised by the TASC thinktank, along with the Foundation for European Progressive Studies.
"Sometimes the claim is made that further debt will burden our grandchildren. However, the costs of tolerating high unemployment are real," Dr Mishel said.
"A prudent policy would invest in job creation through public investment and pay for such spending through a financial transactions tax implemented a few years from now."
Paul Sweeney, economic advisor to the Irish Congress of Trade Unions said there were three major crises -- jobs, fiscal and banking.
"Government refuses to deal with the three crises as one. It focuses only on fiscal and banking, but it is expanding, not shrinking, the gap in the public finances by destroying domestic demand," Mr Sweeney said.
Economist and author Michael O'Sullivan said "currency and bubble wars" between the US and emerging markets will intensify and will leave the ECB in an increasingly difficult place.
"The euro is likely to remain strong, to Ireland's detriment," he said.