A return to decent growth is essential
ANOTHER bad week for Europe, featuring sit-ins in Spain, a lowered ratings outlook for Italy and yet another austerity plan for Greece. The Irish, at least, had Barack Obama’s flying visit to celebrate, but the spectacle of the American president downing Guinness in a pub in Moneygall did not divert the markets. Irish bond yields scaled new euro-era highs, uncomfortably above their levels when a bail-out package was announced in November. Questions swirl about the country’s ability to escape a debt trap similar to the one in which Greece, the first economy to require emergency help, is enmeshed.
According to a report from the IMF on May 20th, Ireland’s public debt, which was just 25% of GDP in 2007, is already 96% and is due to reach 111% this year (see chart). A seemingly model fiscal pupil is now at the back of the euro-area class because of the cost of rescuing Irish banks, which has reached 42% of GDP, and a collapse in national output and property-dependent tax revenues. ...
