The European Crisis and the Myth of the Irish Recovery: an Insight
DOI:
https://doi.org/10.55444/2451.7321.2016.v54.n1.19431Keywords:
Eurozone, banking crisis, austerity measures, interest rates, GDP, GNPAbstract
In this paper I first review the main points of the European crisis, showing that the credibility of a time-infinite fixed exchange rate, together with the free movement of capitals in the EU determined overconfidence, an excessive fall in interest rates, and overborrowing that made the system collapse when the external?originated crisis struck, damaging public finances as the banking system had to be rescued by governments. Secondly, I scrutinize an apparent success story of austerity-linked recovery from the crisis: Ireland. I outline that the outgoing government in 2010 acted well in the midst of the financial crisis, regardless of the effectiveness and desirability of the austerity measures. But I also collect facts and figures evidencing that what appears to be a true recovery is only being obtained by means of some unavoidable accounting tricks depending on a new mandatory national accounting EU rule about the treatment of investments. Unfortunately all this produces inflated figures for the GDP and GNP, while the standards of living of Irish citizens continue to fall behind.
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