The Political Economy of Adjustment Throughout and Beyond the Eurozone Crisis: What Have We Learned? by unknow

Author:unknow
Language: eng
Format: epub
ISBN: 9780367784461
Google: rMwezgEACAAJ
Goodreads: 56461126
Publisher: Routledge
Published: 2021-03-31T00:00:00+00:00

Conclusions

The Irish economy is steaming ahead, but it is not back to “normal”. It is in many respects performing better than the word “normal” might imply, suggesting at least the possibility of an overshoot in growth rates and in employment growth, which, if it continues, must soon start to test the capacity constraints of the economy.

In other ways, damaging impacts of the crisis have been somewhat remediated, but the repair work is far from complete and necessary corrections are still working themselves through the system. For example, the fiscal position of the State and the capital position of the banking system are on a much more stable footing, but the new stability is less comfortable than might be preferred. High indebtedness of the State and individuals might leave the economy more vulnerable to any new shocks, and in the banking system, one could say the same of the high, albeit reducing, level of outstanding non-performing loans.

Moreover, there are some areas in which the crisis adjustment significantly overshot any likely equilibrium point and remains to re-adjust. Construction is an example, because activity fell so close to zero for years that natural demand cannot now be met, with serious consequences for rental markets and house prices. Here, a failure of the market to adjust to create more supply would risk a deepening housing crisis, and damage competitiveness, but if the market does adjust, the demand for workers to meet this pent-up demand at a time of near full employment could put considerable upward pressure on wages, again with the potential for damaged competitiveness.

There is pent-up demand, too, in the area of public spending, where demands for service improvements after the austerity period will need to be carefully and well managed to avoid an overshoot in the other direction. There is a natural resistance to the adoption of a strongly counter-cyclical fiscal stance, while the economy and many of its people feel they are still trying to “catch up” after the crisis.

Ireland remains an anomaly in a European context. The scale of its “bust”, the resilience of critical elements of the economy and its institutions, and the scale of the recovery since the crisis all stand out. Its liberal-oriented but hybrid political-economic model has sustained an enormous impact and emerged in a slightly different but still fluid constellation. Whether the institutions of political and economic decision making see a return toward some former equilibrium or find a new one is still to be determined, because the reverberations of the crisis, albeit more than half a decade since the worst period, are still far from complete.

The demand for responses to all of these forces – many of them now problems of success – as well as the major disruption threatened by Brexit will have to be organized by a more disparate parliamentary system in which the crisis has accelerated the pace of change, leaving political parties which shared power for most of the last 50 years with less influence and with a greater role

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