As Greek lawmakers argued through the night over a bailout they all heartily loathe, a little smugness on the part of the Irish is easy to understand. Five years ago it was they who were forced into a €67bn bailou t, complete with unpalatable fiscal targets. Now Ireland is the fastest growing economy in Europe, out of its bailout programme, and even debating how to dispose of a spare billion euros of fiscal space.
Such a narrative lends itself naturally to a simple morality tale. If Greece is the child stuck on the naughty step, Ireland is a diligent pupil enjoying the reward for having completed the homework on time, and now joins the others sitting in judgment over Athens. A recent cartoon in the Irish Independent even showed German Chancellor Angela Merkel beaming admiration upon the figure of Michael Noonan, the Irish finance minister, as the latter proclaims “Ich bin ein Berliner”.
True, Ireland’s progress since the bailout has been impressive. It required tough measures to restore some fiscal balance (begun under a previous administration), including sharp cuts to the public sector payroll, and an unflinching examination of its rotten banking sector. The Irish government was helped by public acceptance of the need for retrenchment. This itself reflected widespread recognition of how overheated its property market had become.
No wonder, then, that Prime Minister Enda Kenny talks of Greece learning a lesson from Ireland, and urges it to ape Ireland’s “constructive” approach. But its recovery reflects as much the efforts it made decades earlier, during which it transformed itself from one of Europe’s poorest countries to one of the richest. Ireland swallowed Germanic medicine long before entering the euro, opening up its economy, cutting corporate taxes and more than doubling exports to more than 110 per cent of gross domestic product (three times more than Greece). All are well worth emulating, but it is far easier to reform at a measured pace and against a benign global backdrop than in a crisis and being driven along by suspicious creditors.
The differences do not end there. Ireland’s open and flexible economy is nothing like as calcified as Greece’s. Dublin’s failure was to allow its banks to run amok, at one point letting them acquire assets ten times larger than the Irish economy. Greece, on the other hand, had a reasonably healthy banking system before its fiscal crisis dragged everything down.
Ireland has also been lucky. In the past year it has enjoyed a gentle boost from cheaper oil, lower borrowing rates and a blast of eurozone quantitative easing, as well as ongoing recovery in its major export markets, the UK and US economies. It is still a long way from being out of the woods. Public debt is well over 100 per cent of gross national product, and unemployment touching double-figures. Should some unforeseen blow knock Ireland off course, the Greek stand-off has warned of how little leniency there may be from its eurozone partners.
All of which argues for the government to exercise caution when inviting Irish civil society into a grand discussion about how to disperse the fruits of success. Rosy forecasts can prove fleeting. Should Ireland miscalculate and have to revisit public austerity, the supplicants queueing outside Dublin Castle will not rush to return the money.
Ireland’s mistake a decade ago was to reward itself too freely from the fruits of its labour. Eight austerity budgets will have taught it the perils of celebrating too soon. Rather than risk a ninth, Ireland should bank its luck rather than spend it.
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