North a thorn in Souths side / South a thorn in Norths side.

[st333ve]

The Republics budget today was obviously effected by the exchange rate up north, Lenihan obviously avoided the easy tax hikes in petrol and alcohal which could have pulled in a lot more revenue, but the hike in cigarette duty was a stupid move considering the amount of criminality invovled in smuggling cigarettes across the border and the massive costs of policing this kind of activity.
We can expect this crime to pay more and increase in the future.
Cross border shopping will now appeal to people even more considering theyre being squeezed harder, it was a no win situation for Lenihan.
More revenue to flow north and less money in the pockets of people in the south.

All of this might sound great for the north particularly the border regions who have traditionally been hit the hardest economically.However,I predict that in the long run the Republics cheaper corp. tax rates and better road network and infastructure should mean that the north will have no chance of competing for any incoming investment (Other than IT) when it will be needed the most when economic growth begins, leaving it behind yet again as a basketcase economy dependant on the Public sector.

My predictions is that the norths economy will appear to be shrinking less in the short term due to the Public sector employment and stronger retail sector, but in the long term the Republic will appeal a lot more to incoming investors once the downturn has ceased.
The cuts in spending and tax hikes should prevent excessive borrowing that other countries have usedd to hide a lot of the effects of the recession, this should leave the Republic on a level playing field with other economies at the end of the downturn.

[Seos]

The inevitable consequence of weak sterling is inflation. Price differences between the north and the south are going to end.

The CPI measure of inflation for the UK was at 3.2% (annual) in March and ROI was 0.1% (annual) in February
UK inflation jumps on back of weak sterling and food prices - European, Business - Independent.ie

We're expected (in this budget document http://www.budget.gov.ie/2009SupApri...02009-2013.pdf) to have -3.9% CPI in 2009. They're expected to have between 0 and 2% CPI in 2009(Bank of England|Publications|Main Publications|Inflation Report|Latest Overview - February 2009)

So within one year we should have around 4-5% convergence of prices (provided currency changes aren't substantial, which complicates things by affecting inflation as well as directly price differences.)


Anyway the point is prices will converge and possibly reverse (south cheaper then the north). In the case that they reverse then shoppers will come south causing them to converge again.