Thursday, 25 November 2010

Guido responds from unlucky Ireland

Given the scale of Ireland's ongoing economic and political crisis - and the further deep austerity measures announced yesterday - I am reluctant to make this the occasion of a heated parochial British political blog war, particularly one with my fellow Irishman Guido Fawkes. (I exaggerate slightly: Paul Staines of the Guido Fawkes blog is actually a citizen of the Irish Republic, whereas I am merely partly Irish by descent, as a member of the Anglo-Indian-Irish diaspora).

But, having asked 10 days ago whether the right-wing blogs had changed their minds about Ireland, I should certainly flag up the lengthy response from the Guido Fawkes blog. (Though it attributes collectively to me, Ben Chu and Polly Toynbee a considerably more detailed anatomy of Ireland's demise than I offered in that brief post).

The counter-argument is that Ireland was doomed by joining the Euro in 2000 and "the state guarantees proferred in the panic of 2008", and that these causes had become clear by the Spring of 2009.

However, those factors predated the blog's December 2009 prediction that Irish austerity would see it bounce back faster than Britain, which was not made conditional on leaving the euro.

That was a bullish perspective apparently reiterated by Guido in a comment on the New Statesman website at the start of 2010.

Data last month showed that Ireland is out of recession.

UK is still in recession.

Which one is in economic meltdown?

So if the die was indeed long cast, it took a lot longer for the news to be confirmed.

Still, the central Guido Fawkes argument that it is the cost of guarantees to creditors in Irish banks - again risking offering a one-way bet - which is a primary cause of the crisis is plausible, even if the argument that deep austerity could resolve and avoid the crisis proved a false hope.

Among those to offer critiques of the argument that it was euro membership which left Ireland helpless are Phillipe Le Grain and Michael Hennigan, who offers a detailed critique of Irish policy decisions after joining the single currency (though it perhaps remains to be seen how far the contrast with Spain holds). The claim that leaving the euro would offer an "absurdly easy" way out (as Peter Oborne argues) is robustly challenged by The Economist's Bagehot, pointing out that Ireland would then have to pay enormous euro-denominated debts with devalued punts.

Will Hutton points out that having its own currency didn't help Iceland, after its own bubble burst (though Paul Krugman today noted Iceland's resilience in how the deep subsequent recession has been handled).

Take your pick. (In passing, can I commend the common sense of Daniel Hannan who is surely right that heated democratic arguments are surely better conducted without slurring opponents as Nazis - whether that is done by Eurosceptics like the very silly Mr Godfrey Bloom of UKIP, or their opponents).

However, the Irish crisis does again show - on all sides - that few people make their minds up in response to events if one can instead interpret events to favour our existing worldviews.


Guido Fawkes said...

I'd be more impressed with your sagacity if you pointed out where you predicted the demise and/or exit of the Euro-periphery states.

The likes of Farage and Redwood have long predicted that Greece and Germany would not be able to sustainably coexist in a single monetary zone. Did you?

Sunder Katwala said...

With the (arguable) exception of football and the Grand National, I tend to make predictions where I think I have better information than other people opining on them (political events; leadership contests, etc).

As I'm not an economist, I have never gone around making economic predictions, based on my own political preferences, though lots of people on the right, left and centre do this. I am sceptical of partisan reinforcement unless the evidence seems strong, including from my side.

One issue which has led me to be less impressed by the strident confidence of some on the right is that two of the three countries which have got into most trouble have been those most vocally championed by the right for their policy choices (even if the reasons turn out to be quite different whenever the crash happens).

But I guess you've still got Estonia.

I agree the euro is a major economic experiment. Clearly the participants arose for political reasons rather than because of academic study of what would form an optimum currency zone. One reason I haven't opined heavily about what will happen to it - apart from it being complex and open - is that it rather faded away as a major UK domestic issue after 2001.

But at least we've found something you agree with Gordon Brown about.