Latvia to cut government spending 10%-example for Ireland

[patslatt]

Latvia is to cut government spending 10% with the agreement of trade unions and business in order to qualify for international loans. Given the small size of the Latvian government,these cuts will no doubt be very painful for government workers. This is an example for the Irish government to follow in cutting its colossal budget deficit. See Latvia Budget Cuts Get Union Backing Ahead of Parliament Debate - Bloomberg.com

[20000miles]

Hmmm...Pat have you been converted away from Keynesianism?

Or has your dislike for the public service overshadowed your beliefs?

[cd27]

A once off, across the board cut would simulate the devaluation we need but can't have inside the euro. 10% to 15% with subsequent years of 0 growth should tame public spending and restore responsible government.

The once off nature of the operation would also instill confidence in the economy and allow people to plan.

[robert151410]

what about the loans all these guys are servicing. There may be a vicious downward spiral yet.

[cd27]

that's why I say once off, get it done, restore confidence to avoid a spiral of debt crushing people.

[toughbutfair]

it sounds great - I'd take a 10% cut - as not paid by government , it'd be via tax rises, if everybody did.

[feargach]

If everybody takes a 10% cut, then the economy will shrink by 20%, plus the 9% already factored in.

Ireland will then be unable to pay the interest on her existing loans, so we'll default and be cut off from credit until circa 2022.

[kerrynorth]

A once off, across the board cut would simulate the devaluation we need but can't have inside the euro. 10% to 15% with subsequent years of 0 growth should tame public spending and restore responsible government.

The once off nature of the operation would also instill confidence in the economy and allow people to plan.

That would actually be the best approach. There would be a very short-term shock to the economy but prices would quickly adjust. Just cut pay, social welfare and all public service budgets by 15% in one fell swoop and the economy would quickly adjust with a lower price level for all goods and services.

[feargach]

That would actually be the best approach. There would be a very short-term shock to the economy but prices would quickly adjust. Just cut pay, social welfare and all public service budgets by 15% in one fell swoop and the economy would quickly adjust with a lower price level for all goods and services.

Have you forgotten that Latvia shrank 18% in three months, prior to this news, because of previous government spending cuts.

If Ireland cuts spending by €20bn, the same fate awaits us, if not more.

Bare minimum, we'd shrink as much as Latvia, plus the 9% shrinkage we already know is going to happen regardless.

After a 27% economic GDP collapse, which is the best case scenario, it is impossible that we could even service the payments on our existing debts, so we go into instant default.

[the klingon]

Overpaying for projects, staff and infrastructure is definately better than burning the money, but removing money from less productive areas and moving it to infrastructure or knowledge which will deliver cash through savings, increased FDI, lower cost of business etc would be more useful. If we just blandly say no to cuts that is the wrong reaction. Stuff like what's being talked about in SOI thread, these things will instil confidence in Ireland. I don't see anyone becoming a confident and good little spender if they take a 10% pay cut.