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This study by Niamh Hardiman from UCD School of Politics and International Relations examines Ireland's variety of liberalism and the impacts of the financial crisis. It delves into the macroeconomic, social partnership, and industrial policy aspects, analyzing the nature and origins of the crisis along with the political and policy context. Exploring the banking versus fiscal dilemma, it questions the sustainable growth prospects amidst the unemployment shock. The research reviews poor banking regulation, overheating in the EMU, house price inflation, fiscal weaknesses, and governance issues. It also critiques the orthodox economic framework and fiscal responses to the crisis, highlighting factors contributing to the collapse of ruling parties. Through in-depth analysis, this study offers insights into Ireland's economic and political challenges post the global financial crisis.
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Ireland in the global financial crisis Niamh Hardiman UCD School of Politics and International Relations Niamh.Hardiman@ucd.ie
Outline • What ‘variety of liberalism’? • Anglo-American LME… • … with an activist state • Macroeconomic • Social partnership • Industrial policy • Nature of the crisis in Ireland • Banking vs fiscal • Origins of crisis • Political and policy context • Current experiences • An entirely ‘orthodox’ response – why? • Sustainable?
Dramatic rise and fall Employment-to-population ratio Eurostat, May 2011
Debt and deficit shock Eurostat, April 2011
Background • Poor banking regulation • Overheating in EMU • House price inflation • Underlying fiscal weaknesses • Thinner tax base • Strong spending commitments
The House Price Boom and Bust Karl Whelan
Composition of taxation TASC 2010, p.11
Lower reliance on income taxation OECD, Taxing Wages 2007-8 (2009), p.51
Pay-tax trade-offs Source: OECD Taxing Wages 2007/8 (2009)
Explaining crisis • Three bank reports tell us: • ‘Plain vanilla’ speculation • Poor regulation • ‘Herd mentality’ • But • What is this ‘group-think’? • Why such poor accountability? • Why no serious counter-weight? • Actors, institutions, ideas • Political coalitions after 2000: Fianna Fail and banks, property developers, builders • Poor governance, public and private • ‘Orthodox’ economic framework
Fixing the mess: Restructuring the financial sector • Aversion to nationalization • NAMA • Slow recapitalization • New regulatory appointments • Central Bank Governor, Financial Regulator • But old regime in the banks
Big questions • Economic sustainability • Political sustainability
Debt Ratios (EC and IMF Projections) GNP GDP Karl Whelan
EU, European Economy: the Economic Adjustment Programme for Ireland. Spring 2011. p.12
Unit labour costs – painful deflation Harmonized competitiveness indicators based on unit labour costs, whole economy. ECB, June 2011
Collapse of ‘ruling’ Fianna Fáil party Red C polls