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Politics : American Presidential Politics and foreign affairs
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To: TimF who wrote (43258)5/18/2010 2:31:36 PM
From: DuckTapeSunroof  Read Replies (1) of 71588
 
Re: "In the long run the lower government spending part of the austerity plans will help countries...."

Entirely possible.

(Of course, as Lord Keynes famously noted: "In the 'long-run' we are all dead.")

The 'long-run' can take a very long time to materialize.

Re: [Notice that Ireland has the largest deficit, at 14.7%. This is in spite of (or more aptly because of) the enactment of severe austerity measures] ""Because of" isn't backed up in the article. Its a rather extreme claim."

Not at all!

Completely understood by every Irish economist and every politician there.

Standard economics... by massively withdrawing money from the economy (cutting current spending) they have added to the already massive reduction of liquidity that the Global Economic Crisis and subsequent Irish Recession had brought.

Consequently: LOWER ECONOMIC GROWTH (in the 'short-to-mid-term' anyway! <GGG>), and LOWER GOVERNMENT REVENUES are produced --- because the slower economy produces lower tax revenues, thus their current account imbalance grows even larger, and, as we see, their deficit/borrowing/ and interest payment on that borrowing all rise.

No 'mystery' at all. Take massive amounts of liquidity out of any economy and you see lower current growth rates and lower revenues for government.

Now... in the 'LONG-TERM' this should all produce a stronger and more sustainable base from which they can eventually begin to grow again... but in the short-term what they unfortunately see is the largest current accounts deficit in all of Europe. Even worse than anything Greece has reported....
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