THE POLITICS and economics of fixing the budgetary crisis are fraught. This week’s judgment call by the authoritative Economic and Social Research Institute (ESRI) on the Government’s plan to bring the books close to balance by 2014 have made the politics more fraught still. The institute caused something of a storm when it stated, in unusually strong terms, that it believed the four year timeframe for the adjustment to be too short.
It talked of having “grave doubts” about the 2014 target year for completion of the adjustment and advocated extending the time horizon to 2016. Too much austerity, it believes, might depress economic growth. This could make closing the deficit impossible. Its assessment could be right. The economics are not good. Ireland’s budgetary position is very finely balanced. The world economy’s recovery is fragile. We may not be able to make it unassisted.
But every effort must be made. And not only to prevent the very serious and involuntary loss of sovereignty that seeking outside assistance would entail. The euro project is in trouble. It is now conceivable that it could unravel. This would be a catastrophe for our country and our continent. All participants in the project have a duty to all they can to prevent this happening.
Being a member of the Europe’s political and economic union comes with rights and responsibilities. For Ireland, the net benefits of membership of that union over nearly four decades have been overwhelmingly positive – politically, socially and economically. Since the banking crisis exploded more than two years ago, the buttressing of Ireland’s financial system by the European Central Bank has prevented its collapse. Had Ireland not been part of the euro zone, the system and the State’s economy would have melted down.
As Greece has demonstrated, national economic crises have consequences beyond a nation’s borders when countries are bound together in a currency union. In order to contain the euro’s crisis earlier this year, extraordinary and previously unthinkable measures were put in place. The crisis is contained for now. But it is far from being resolved. It full resolution will require more very painful measures over an extended period to mend the mistakes of the past.
It is the agreed responsibility of all member states to fix their own problems on terms they all collectively agree; with each other and the European Commision. Ireland signed up last year to do that by 2014. Having benefited from the rights that go with EU and euro area membership, Ireland must meet the responsibilities it entered into. This reality is understood by the political parties which account for the overwhelming majority of elected representatives in Dáil Eireann. This country still has a fighting chance to climb out of the deep hole into which it has got itself. If, in the future, the position becomes obviously unmanageable, that reality will be acknowledged at European level. Flexibility and fudge are not unknown in EU politics. There is still hope that it will not come to that. As the ESRI itself admitted, nothing is inevitable.