Friday 16 November 2018

With real prudence we'd already have a strong budget surplus

The projected €800m in the State's coffers may disappear all too quickly in a budget carve-up, warns writes Colm McCarthy

SENSIBLE CAUTION: Finance Minister Paschal Donohoe is not stingyvisited
SENSIBLE CAUTION: Finance Minister Paschal Donohoe is not stingyvisited

Countries which have retained their own currencies can create liquidity, either for their government or their banks, although only in their own currency. Countries with no home currency are reliant solely on their capacity to attract and retain lenders on their merits as sovereign borrowers. Should they be unable to do so, they must resort to official agencies such as the IMF, or the troika arrangement which Ireland and several other eurozone countries relied on after the financial bust in 2008.

For a country without its own currency, the availability of volunteer lenders in an emergency will depend on how well they have managed their public finances. It helps too if they have been diligent in supervising their banks. The payoff for prudent financial management is that national sovereignty need not be sacrificed when trouble strikes.

It is not an accident that several eurozone countries, lacking a domestic currency, ended up in IMF bailouts, nor that these were the countries which had been least prudent in managing their public finances and banking systems.

Please sign in or register with Independent.ie for free access to this article.

Sign In

Today's news headlines, directly to your inbox every morning.

Don't Miss