EXPERT OPINION:IRELAND HAS distanced itself from the high debt problems of Greece, Portugal and Spain out of "sheer bloody-mindedness" by taking hard measures to correct its fiscal deficit, according to a UK author and expert on the euro.
David Marsh, author of The Euro: The Politics of the New Global Currency, said the recent stability of Irish sovereign debt spreads showed that the markets believed Ireland's recovery plan was "credible, will be maintained and will be ultimately successful".
Mr Marsh, a former Financial Timesjournalist, said the plan had distanced Ireland from the heavily indebted southern euro-zone states and aligned it with the more prudent northern euro-zone states such as the Netherlands.
"This will be the third time over the last 25 years that the Irish have tightened their belts – the country has shown that it is willing to take the medicine and the necessary pain," he told The Irish Timeson a visit to Dublin.
“Ireland has a much better chance of succeeding than Greece, Portugal or, dare I say, Spain.”
As a member of the 16-country currency bloc, Ireland cannot devalue to correct the public deficit but has taken the difficult task of reducing wages directly “in a very swingeing way”, he said.
All countries must continue to take corrective action to prevent fiscal deficits ballooning, he added.
There is a permanent sword of Damocles hanging over every country, he said. “The markets can be a careful source of discipline and unfortunately you have to show permanent progress.”
Mr Marsh warned that Ireland would need to maintain high taxes to stay within EU deficit limits under the stability pact following a recovery in the economy.
The stability pact “should have been exerted with far greater intensity”, he said, as the euro zone’s “one-size-fits-all by definition encouraged recessions in some countries and asset-inflated bubbles in others”.
“I don’t think the euro will survive in its present form unless there is more of a political union.”
Mr Marsh is co-chairman of the Official Monetary and Financial Institutions Forum, a group which links central bankers and sovereign wealth funds in private discussions with company executives. He is also a senior adviser to London-based corporate finance firm Soditic.
