There’s been a lot of policy chatter over the last year in the UK about the lessons the Britain can learn from Canada and Sweden- at least a decade or more ago – on cutting government expenditure harder and faster than anyone really wants. That’s all fine, but why not look across the Irish Sea and watch it happen in real time?
Almost exactly one year ago, spreads on Ireland’s five-year credit default swaps rose to a record 377 basis points – about where Greece is now.Today, they are nothing like that. The difference is, Ireland got ruthless with the public sector and Greece almost certainly won’t.
Of the PIIGs, the markets have far more confidence in Ireland’s ability to recover at a sustainably higher rate, because they chose the roughest medicine early on and swallowed it whole. The PIIGs (Portugal, Ireland, Italy, Greece and Spain) are becoming the PIGs without Ireland.
No one is talking about an Irish default any more. Go figure.
So three cheers for Ireland for showing Britain not only what can be done with ultra-competitive low taxes to attract investment and generate exceptional growth in the good times. And more cheers for demonstrating how to deal with a severe financial crisis like we have now – tackling it head-on.