Ireland is a canary in the coal mine for many of the other troubled economies in the region. It was troubled early, along with Greece and before Spain and Italy. It, therefore, had to make tax increase and austerity decisions early. It now appears that this combination has become as deadly as many economists feared.
Reuters reports that
Held up as a role model for other indebted euro zone nations, Ireland is now in danger of losing the battle to repair its precarious debt position and return to bond markets in 2013.
And, so, Ireland begins anew the race to decrease its deficit enough to regain the confidence of capital markets which it lost just over a year ago. It would be nearly impossible for an economy which is Ireland’s stage of contraction to right itself into a growth mode until well into 2012, if any normal economic pattern prevails. This would leave Ireland with only a few quarters to reach a 2% or 3% growth rate
If Ireland cannot reverse its slide, there is a reasonable case that other economies in a like position, which have decided to take on the austerity and higher tax experiment, will find that the effort is doomed.
Douglas A. McIntyre
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