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Thread: the case for stimulus in ireland, spain & greece

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    Default the case for stimulus in ireland, spain & greece

    unemployment has just hit 25% in spain, ireland is not far from 15% and greece is .. probably has bigger problems than ireland and spain combined

    if we assume for a moment that a push to balance budgets (or austerity) is good policy but bad politics on the basis
    - long term budget deficits imply unsustainable debt and a debased currency, inflation, economic collapse
    - austerity as a means to balance the budget is hugely unpopular because it means unemployment and adjustments to living standards

    unemployment and abrupt lowering of living standards means crime, social unrest, dissatisfaction, and climates in which extremist parties can emerge. we're already seeing this in some european countries as far right and far left parties grow in popularity, the conditions in which fascism rose as a political force during the 30s. This has a far greater social cohesion cost than that of an unbalanced budget.

    Therefore, lets not allow bad politics to destroy good policy. Why dont we provide some stimulus to take the edge of the austerity measures. The goal of the stimulus should be to create employment, not to prop up living standards. Stimulus has to be funded by EU (EIB) as funding not possible from national budgets because countries that need the stimulus are simply not in a position to do that. The EIB can get the cash to do this from ECB quantitive easing, some people wont like this but the reality is that euro liquidity is being destroyed by an ongoing deleveraging. A certain amount of quantitive easing is possible to the extent of the difference between money in circulation now compared to 2006. The stimulus should be conditional on some measures such that the country cannot get itself back into another situation that requires a similar stimulus program.

    In ireland's case, the obvious place for a stimulus package is construction as that sector is under-utilised at the moment due to over provision of homes, office space in the boom years. Rather than let the skills in our construction sector emmigrate or move to a different sector, find some useful construction project that will be employment intensive. The goal is to get people back to work, not to get people currently working to switch jobs so the stimulus project shouldnt be competing for workers with non-stimulus projects.

    Example projects:
    This could be new rail links, public facilities, better water or sewage infrastructure, it doesnt matter as long as it's something that's genuinely needed, that would be done anyway if the govt had the money to do itself.

    Which countries / sectors to receive stimulus:
    - Countries with unemployment over 12%
    - Target labour intensive sectors with the most unemployment

    How to fund:
    - materials, land; purchased by EIB
    - labour; part EIB, part by state (at least to the value of the unemployment benefit saved because people are back to work)
    - stimulus to be repaid over life of the created infrastructure by the users of that infrastructure (this insures it's a useful project)

    Goals
    - reduce unemployment below 10%
    - reduce social unrest and dissatisfaction
    - do not prevent any necessary adjustment to living standards (slowing rate of adjustment is ok however)

    What do we think ?

  2. #2

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    We are already stimulating the economy to the tune of about €18 billion a year.
    ''The tattoo has a profound meaning: the superficiality of modern manís existence.'' - Theodore Dalrymple

    "Any fool can make something complicated. It takes a genius to make it simple." - Woody Guthrie

  3. #3
    Dylan2010
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    So basically Ancient Egypt collapsed because they didnt build enough Pyramids....who knew!

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    Politics.ie Member Analyzer's Avatar
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    Default. And Euro exit. Exit from the EU also (because it is now an ongoing economic union of decay an ineptitude).

    That would solve the problem.
    Coveney's ambition is the be Ireland's next EU Commissar and Ireland will pay a price as he builds his CV to position himself sufficiently loyal to the nEU empire.

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    Politics.ie Member Crazy horse 6's Avatar
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    Leave the euro and press reboot.

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    Politics.ie Member Dan_Murphy's Avatar
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    Quote Originally Posted by dancl2000 View Post
    - stimulus to be repaid over life of the created infrastructure by the users of that infrastructure (this insures it's a useful project)
    But you cannot do that, that'll take money out of the economy!!!

  7. #7
    Ramps
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    Why dont we provide some stimulus to take the edge of the austerity measures.

    Why don't you take up smoking cigars to take the edge off your withdrawal from cigarette smoking?

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    Politics.ie Member Fides's Avatar
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    Quote Originally Posted by Analyzer View Post
    Default. And Euro exit. Exit from the EU also (because it is now an ongoing economic union of decay an ineptitude).

    That would solve the problem.
    It would create a few new ones.Exiting the Euro and EU won't stop us spending more than our income. Defaulting would mean no one would be too keen to lend us money to bridge the deficit. The new Irish punt would devalue pushing up the price of imports (particularly fuel) while making exports more competitive....

    It is a solution but not a problem free one.

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    Quote Originally Posted by Ramps View Post
    Why don't you take up smoking cigars to take the edge off your withdrawal from cigarette smoking?
    well a better analogy would be using nicorette patches to get off cigarettes..

    and also giving up smoking isnt going to have negative effects, but sucking too much money out of the economy too quickly can; the high unemployment, loss of skills in construction as people emmigrate, retrain

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    Quote Originally Posted by Dan_Murphy View Post
    But you cannot do that, that'll take money out of the economy!!!
    right, instead of taking a lot of money out of the economy in a short period and absorb all the problems that come with that, we accept that we need to balance the budget but in a way that doesnt let unemployment get out of control.

    so yeah the stimulus would be much less than the change needed to balance the budget, and gets paid back over a much longer period

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